Santa Monica’s Demand Media Inc., publisher of online brands such as do-it-yourself website eHow.com and fitness resource Livestrong.com, was a high-flier when it debuted as a cheap content mill that gamed search engine results. Then Google Inc. altered its algorithm to direct searches to higher-quality content and Demand spent the better part of the past five years bleeding cash and seeking a way forward.
Chief Executive Sean Moriarty, who joined the company in August 2014, thinks he’s finally found a way to right the ship: shifting to e-commerce could help return it to profitability by the company in August 2014, thinks he’s finally found a way to right the ship: shifting to e-commerce could help return it to profitability by year’s end.
Gone are several of its former businesses, including arts and crafts website Creativebug, social media engagement tool CoverItLive and domain registry Rightside. Layoffs and other cost-cutting measures have reduced the company’s expenses by 21 percent since 2013. Cash from spinoffs and budget cuts have helped Demand eliminate its debt and build a cash cushion of $38.5 million, according to Securities and Exchange Commission filings.
Moreover, the firm is working to substantially increase the quality of its content and distance itself from its content farm reputation, Moriarty said.
“The idea that you can produce low-quality content and yoke it to a single distribution form, i.e., search, to me is flawed,” he said. “You just end up with a moment-in-time arbitrage opportunity. If you look at the history of what essential platforms do to arbitrage players, they squeeze them out violently.”
Change in fortune
The holding company for a portfolio of Internet properties has been bitten badly by its reputation as a content farm, an industry term for a publisher that cares more about editorial scale than quality with the goal of luring in Web surfers and advertisers.
After Google recalibrated its search engine formula in 2011 to partly reject cheap content, Demand’s market capitalization shrunk dramatically, from more than $2 billion to about $100 million today. Last year, the company lost $43.5 million on revenue of $126 million, the latter figure representing a 27 percent drop compared with 2014.
Demand has purged its archives, removing 2.4 million articles from eHow, reducing the count to 625,000.
“There’s never been a better time, I think, to be a publisher, if you are good,” he said. “We eliminated a lot of duplicative content and we are now building off of what we believe is a much more stable base.”
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