Demand Media Q4 Sales Soar, Driven By Engagement, Audience Growth

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Say what you will about "content farms," but companies stigmatized as such are presently pleasing investors.  

In its first quarterly results since going public last month, Demand Media reported fourth-quarter sales up 33% to $73.6 million, while net income increased to $1 million -- up from a loss of $3.9 million year-over-year.

"Our record performance in the fourth quarter was driven by our ability to attract and engage consumers while delivering great results for our growing base of advertisers," Richard Rosenblatt, Chairman and CEO of Demand Media, said on Tuesday.

"In the fourth quarter, new brand advertisers helped fuel 36% year-over-year growth in revenue per thousand page views, or RPM, on our owned and operated properties, while our audience grew organically to more than 100 million unique monthly visitors worldwide," Rosenblatt added, citing comScore data. "Increased engagement and audience growth during the quarter from emerging channels, particularly Facebook and mobile, highlight just some of the large opportunities for our business model."

In an SEC filing issued last month, Demand said it expected to report a maximum profit of $600,000, and quarterly sales of $73.5 million.

Demand credited the better-than-expected performance on the strength of its content and media segment, which includes sites like eHow and Livestrong, which saw sales rise 46% during the quarter.

Meanwhile, Demand Media's domain registration business was up 14% during the quarter.

Going forward, however, Demand said it expected to post losses during the first quarter and the year ahead.

Specifically, it said it expected to post a loss from operations of between $7.1 million and $8.6 million during the first quarter and between $1.4 million and $7.4 million for all of 2011.

Another issue for Demand is Google's professed war on "content farms," which it is pursuing with a Chrome extension, dubbed Personal Blocklist, which lets users block specific Web sites from appearing in search results. Going forward, Google Principal Engineer Matt Cutts says the search giant will analyze blocked sites, and likely use that information to alter search rankings.

And while analysts doubt whether Google's efforts can curb the farms, Demand did warn in its filing that this sort of content filtering could eventually be cause for concern.

According to Demand, sales are expected to grow between 23% and 28% during the year ahead.

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