Demand media is an American content and social media company that operates online

brands, such as eHow and Cracked, and is known for creating online content through its Demand
Media Studios division based on a combination of measured consumer demand and predicted
return on investment. Its business model consists of 5 steps: gathering data about queries, using
algorithms to determine appropriate profitable queries, outsourcing the queries to writers,
videographers and other professionals and instructing them for producing articles and videos at a
fixed cost, using SEO techniques to try to ensure that the answer works prominently, selling
advertisements to the content's audience

Gathering
data

Advertisem
ent

SEO
technoqu
es

Algorithm
s

Outsourci
ng
content

What revenue sources does Demand Media rely on?

DM has 2 distinct and complementary parts: the domain registration business and a content
and media business.
Basic revenue sources are:
Domain registration
o eNom
Content and media business
o Generated from contents in its own sites (LivesStrong.com, eHow, Anserbag.com,
Cracket.com, Trials.com, Golflink.com)

o Generated from contents in other sites ( Only Google was responsible for of its
revenue)
o Generated from the licenses to the 3rd party companies to use its contents. (in this
case benefits are shared among them)
Here are the revenues according to their sources.

Revenue
Owned & operated
Network
Registrar

Year ended
December 31,
2008
170,300
62,800
22,000
85,400

Year ended
December 31,
2007
198,500
73,200
34,500
90,700

Year ended
December 31,
2006
252,900
110,800
42,100
100,000

Source: Demand media, Inc.

DM tried to attract more and more visitors as the customer acquisition costs were negligible. On
average, DM estimated that the company could make $20-30 per thousand page views from
performance advertising across the broad range of topics covered on a site like eHow. In 2010
and 2011 the company invested heavily in building a direct sales force to sell advertising space
to marketers and advertising agencies. Early results had been promising from both a revenue and
advertising-performance standpoint. The company estimated that it might be able to sell branded
advertising for $10-20 per thousand page views and what was unsold for branding might fetch
$1-2 per thousand page views, as remnant advertising running on the same pages as the
performance advertisements.

Collaborators
DM existed to meet the consumer need for relevant and specific content. When traffic related
to particular topics reached a significant volume, a branded identity would be given to the topic
and a well-known personality would be associated with it, e.g.
Content related to fitness and nutrition was represented by the cyclist Lance Armstrong
and was assembled on web-site under the name LIVESTRONG
To serve fashion and beauty, a partnership was formed with the model Tyra Banks and
her company Bankable Enterprises.
In April 2010, the Gannett-owned USA Today announced itd be outsourcing its newly
created online travel tips section to DM. 4 months later, Hearst Corporation (another of the
countrys largest media organizations) announced that it had partnered with DM for online
content for 2 of its properties. DM had been contracted to write content for Homes Guide in the

real estate section of San Francisco Chronicles website SFGate.com and for a small business
guide on the Houston Chronicles site.
One of advertising networks that DM is partnering with is Google Ad Network. As YouTube
partner DM share in the revenues generated from advertisements that appeared either before its
videos, as overlays, or on banners.

Competitors
In the sphere of domain registration business, DMs largest competitor was GoDaddy, which
was also the largest domain registrar, who sought to sell web hosting and e-business software and
services to registrar customers.
As for content and media business DM competed for consumers attention using questionand-answer sites, online encyclopedias, and blogs and topically focused online media. It
competed for advertising revenues with these properties and with advertising networks.
In the sphere of question-and-answer sites DMs competitors are:
Ask.com
Associated Content
About.com
Answer.com
Suite 101
ChaCha
Mahalo
Compared to competitor sites like Ask.com, About.com, and Answer.com, DMs ehow.com has
less unique monthly visitors in 2008-2010.
Models for attracting contributors to create content for question-and-answer sites were
different. Some of them paid contributors per article, some shared advertising revenues with
content creators.
DMs main competitors are:
Wikipedia is operated by Wikimedia Foundation, a nonprofit charitable foundation.
It has 78mln unique US visitors per month. It allows its users to freely create and add
webpage content on their preferred topic.
AOL is a media company whose profile has risen and fallen a number of times
since its inception 20 years earlier. In 2010 AOL made acquisition that helped to
move the company away from its revenue base as an internet service provider and
cultivate revenue from content and platform services. AOL reached 112mln unique
US visitors per month.
New York Times Digital in 2011 NYT portfolio comprised NYTimes.com,
Boston.com, About.com and third party sites such as Winetoday.com,
GolfDigest.com. The family of sites drew 72 mln unique US visitors per month.

 Yahoo! is a portfolio of owned-and-operated content and community sites and third

party sites for which it served as an exclusive advertising placement through a
wholly-owned subsidiary Right Media. It was second only to Google in traffic with
167 mln unique US visitors per month.
Google Consistent with its mission of organizing the worlds information, Google
hosted and indexed specialized content on sites such as YouTube, Picasa, Blogger,
Google News, and Scholar among others and it indexed general content on
Google.com. Google had historically preferred the role of provider to that of content
creator, but in some areas it gave preference to its own content.
Glam Media is concentrated on content related to fashion. The majority of Glams
visitors were women. It performs more as a publisher than a network.
In this slide we can see Top

web properties in the US (January 2011)

Property

Unique visitors per month (US;

000s)

Yahoo! sites
Google sites
Microsoft sites
Facebook.com
AOL, Inc.
Ask Network
Amazon Sites
Wikimedia Foundation sites
Demand Media
Apple Inc.
New York Times Digital
eBay
Answers.com sites

178.864
178.516
176.770
153.020
110.996
95.719
82.608
78.563
75.454
71.952
71.887
65.913
55.467

Unique Monthly visitors and monthly page views of eHow and competitor sites
(October 2010)

Ask.com
About.com
Answers.com
eHow.com
Hubpages
Associated Content
Squidoo
Suite101.com
Examiner.com

Unique monthly
visitors(000s)

Monthly page
views(000s)

80.200
49.074
38.190
35.880
12.391
12.307
8.805
7.871
7.577

927.161
365.512
185.441
127.635
43.357
56.559
38.642
31.207
44.026

WikiHow
Mahalo

7.574
5.081

18.632
11.398

Which should management prioritizecontent quality or that content be found

by search engines?
From the beginning of its creation Demand Media gave highest priority to its content quality.
It outsourced stable 10.000 freelance writers, video producers and editors to produce over 5000
pieces of content per day. Each piece processed by Demand Media Studios had 14 human
touchpoints involved in the creation of each article or video. In addition to this the categorization
community was accurately tagging and indexing each piece of content with 94% precision versus
to machines 50-60%.
Actually the revenues from better-quality contents were higher. The reason was they ranked
higher in search results than inferior content and the top-ranked search results netted the most
clicks. The first search result got 45% of the traffic.
The company prided itself on employing more copyeditors than the top 10 newspapers
combined.
To have its content found by customers using search engines, Demand Media adhered to the
SEO techniques recommended by Google. It ensured that its sites loaded fast and did their best
to host content that would satisfy its visitors.
To sum up, we can see that the technical tools are already being used in order to get attention.
Thus our group came up to the conclusion that Demand Media should rather prioritize the
content quality, which in its turn, will bring to broader visibility.

Demand Media Income Statement ($, 000s)

Revenue
Owned & Operated
Network
Registrar
Operating expenses
Service costs
Sales and marketing
Product development
General and Administrative
Loss on disposal of assets

December 2008
170.300
62.800
22.000
85.400

December 2009
198.500
73.200
34.500
90.700

December 2010
252.900
110.800
42.100
100.000

98.200
15.400
14.400
28.200

114.500
20.000
21.500
28.400

131.300
24.400
26.500
36.700
700

Amortization
Total Operating expenses

33.200
189.400

32.200
216.500

33.800
253.400

Income(loss) from
operations
Net income before interest,
taxes

(19.100)

(18.000)

(500)

(20.300)

(21.000)

(2.400)

How should the business respond if Web audiences begin

to rely more on social recommendation than search in the
future?
Demand medias model proved to be effective for the five years of its existence, and company
started to demonstrate an ability to generate a profit. But in a dynamic world where we live
changes are made every moment. Recently, two new trends in the behavior of audience could
threaten the future success of the company. The first one is the emergence and increasing
popularity of social networks. More and more people started to spend more and more time in
social sites like Facebook, Twitter, and FourSquare, relying on social discovery rather than
search. The company could not depend only on the users who will share the links of their sites
because people were usually sharing newsworthy, intriguing or funny things, and it was harder to
predict what will inspire them. Moreover the shared content did not monetize very well because
visitors arrive to the site by chance and not with intent to search or buy something.
The second one was the adoption of applications for smart phones and tablets. Apps suggest
another way of content distribution and as the popularity of IPhone and IPad grew, more and
more media companies use this opportunity to create an advantage that they lost with search.
But both of these threats could become a good opportunity for the company if it makes the right
use of them.
Initially Rosenblatt aspired to a balanced pie, in which traffic from search would constitute no
more than one-third of total traffic, and direct traffic and social media would constitute the other
two-thirds as equal contributors. But with the changes of online landscape they should pay more
attention to social media and change the proportion in favor of it.
At first we suggest to collaborate with Facebook and other social networks. The company should
create Facebook pages for all of its popular sites like ehow.com, Livestrong.com etc. The users
will like this pages in Facebook and will regularly get news and new articles from the sites.
With use of algorithms they can also detect what the user is searching for by search engines and
bring the link of relevant content to its Facebook page.

The second thing that it can do is to create a multi-author blogs covering a single subject, for
example politics with posts written by large numbers of authors and professionally edited. Blogs
are interactive, allowing visitors to leave comments and even message each other via GUI
widgets on the blogs, and it is this interactivity that distinguishes them from other static websites.
Here the articles would be more intriguing and newsworthy, and this will increase the number of
shares.
And the third step is to make use of app-based distribution and create a mobile and tablet
applications for their most popular sites. As for monetization of their apps, they can use
freemium model of The Economist or Cosmopolitan where the part of an issue was available for
free and the consumer could elect to unlock the full issue for a fee.
All these changes can be made with the contribution of Pluck - the company that was recently
acquired by Demand Media. Pluck possessed mobile capabilities as well as the core functionality
of article comments, ratings, and reviews, blogs, photo galleries, and integration with Facebook,
Twitter, and LinkedIn.
Of course, all these steps will require additional investments but there are necessary and crucial
for future development of the company. The investments will surely be paid off in near future.
For some time company can rely on the revenue of its domain registration business which
comprises 50 % of its total revenues.