Anticipating IPO, Demand Reports Climb Out Of Red

For the most recent quarter ended September 30, Demand Media posted a net loss of $305,000 -- far more modest that its loss of $4.2 million the previous quarter, and $1.9 million year-over-year.

In an amended S-1 regulatory filing released Friday, the content company credits much of the growth to its "content and media" business, which was responsible for sales of $39.8 million -- up 39% year-over-year. Demand's domain business recorded sales of $25.5 million -- up almost 11% year-over-year.

While averse to the term, Demand Media is often lumped in with other "content farms," which automatically assign "stories" to freelancers based on user interest and their search engine optimization potential.

The Santa Monica, Calif.-based company made headlines in early August when it filed for an initial public offering. Demand was reportedly seeking to raise $125 million at a $1.5 billion valuation. Soon after the original filing, however, The Wall Street Journal reported that Demand was "deep in the red," in 2009 despite claims of profitability from its founder and CEO Richard Rosenblatt. Citing the company's IPO filing, The Journal revealed that Demand had never been profitable since its inception.

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This week, Demand reported that its overall traffic continues to increase, as its owned-and-operated sites attracted 94 million unique visitors during the most recent quarter -- up from 86 million during the second quarter of the year.

In an effort to increase page views on the cheap, mainstream publishers are increasingly licensing Demand's content to pad their online offerings. The Houston Chronicle's Chron.com and San Francisco Chronicle's SFGate.com -- both owned by Hearst Co. -- just recently began adding Demand content to their sites, while Gannett Co.'s USA Today recently employed Demand to power its "TravelTips" section.

The practice is also officially big business: Yahoo in May agreed to buy top Demand Media rival Associated Content for a reported $90 million.

Earlier this year, Demand debuted a Content Channels revenue-sharing service that places content on participating publisher sites. Under the terms of the partnerships, Demand is underwriting the cost to create and serve the content, and manage the ad programs associated with the implementation of the program. Publisher partners, meanwhile, will be responsible for selling display advertising for the Content Channels-powered sections of their sites.

For the first half of the year, Demand reported $114 million in revenue, along with a net loss of $6 million, and adjusted operating income before depreciation and amortization of $26 million.

Along with syndicating content, Demand also owns several sites, including eHow, Cracked.com, and Livestrong.com.

 

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