Demand Media planning to go public, SEC filing sheds light on revenue

August 6th, 2010 by Chris Hogg Leave a reply »

The massive content hub that has become the talk of the online world is planning to go public. Today, Demand Media filed an S-1 with the U.S. Securities and Exchange Commission (SEC) which is the first step to an IPO.

As All Things D notes, it doesn’t include info on the value Demand Media thinks it can get when it goes public, but it’s the first time the outside world has seen numbers within this private company.

According to financial disclosures, Demand Media is making lots of money, but it’s not yet profitable.

For the year ended December 31, 2009 and the six months ended June 30, 2010, Demand Media reported revenue of $198 million and $114 million, respectively. For these same periods, the company reported net losses of $22 million and $6 million, respectively.

According to the SEC filing, Demand Media generates a substantial portion of its revenue from selling ads and through domain name registrations. There are more than 10,000 Demand media contributors now and content they create is syndicated to Demand Media sites such as eHow, Trails.com, Cracked, and Livestrong.com.

And as Danny Sullivan pointed out, revenue generated from search engines are a big part of its business; 26 percent of Demand Media’s income this year came from Google, up from 18 percent a year ago.

The SEC filing points to specific agreements with Google that expire in 2011 and 2012:

We use Google for cost-per-click advertising and search results on our owned and operated websites and on our network of customer websites, and receive a portion of the revenue generated by advertisements provided by Google on those websites. Our Google cost-per-click agreement for our developed websites, such as eHow, expires in the second quarter of 2012 and our Google cost-per-click agreement for our undeveloped websites expires in the first quarter of 2011. In addition, we also engage Google’s DoubleClick ad-serving platform to deliver advertisements to our developed websites and have another revenue-sharing agreement with respect to revenue generated by our content posted on Google’s Youtube.com, both of which are currently on year to year terms that expire in the fourth quarter of 2010.

Demand Media also notes potential areas where change can bring about a big hit to its bottom line, noting:

Our failure to successfully manage our SEO strategy could result in a substantial decrease in traffic to our owned and operated websites and to our customer websites through which we distribute our content, which would result in substantial decreases in conversion rates and repeat business, as well as increased costs if we were to replace free traffic with paid traffic. Any or all of these results would adversely affect our business, revenue, financial condition and results of operations.

If you want to see Demand Media CEO Richard Rosenblatt describe his business himself, here is a sit-down with Kara Swisher at the D8 conference:

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