Demand Media Files for an IPO; Hopes to Raise $1B

Online content platform had revenues of $114M during the first half of 2010; would be the first billion-dollar IPO in the media business since Google in 2004

Last Updated: August 16, 2010 @ 8:59 AM

RELATED: Content 'Farms': Killing Journalism — and Making a Killing

Demand Media, the online content platform that churns out thousands of search engine friendly freelance-written articles – a formula that generated nearly $200 million in revenues last year, and catcalls of “content farm” from working journalists – filed paperwork with the Securities & Exchange Commission on Friday, the first step in its plan for an initial public offering.

According to the filing, the company had revenues of $114 million during the first half of 2010 — up from $91.3 million during the same period last year.

But Demand – a company that produces more than 4,000 video clips and articles a day based on algorithms — is not yet profitable.

The company, which produces content for USA Today, Livestrong.com and other websites, incurred a net loss of $6.05 million during the first six months, though that was a better result than the first half of 2009, when the company lost nearly $14 million. (Figuring in stock considerations, its overall loss was $22 million through June, though, again, better than the $28 million it lost during the first six months of ’09.)

Nonetheless, according to Wired, Demand — launched in 2006 by Richard Rosenblatt — was given a billion-dollar valuation by its list of blue-chip investors. If so, it would be the first billion-dollar IPO in the media business since Google went public in 2004.

No date has been set for the IPO, though the paperwork has the year 2010 listed, so its conceivable Demand would like to get this done sometime in the fall.

And Demand is no doubt looking to build off the momentum behind the concept – and a hot sector of the media business. In May, Yahoo bought Demand rival Associated Content for a reported $100 million. In early June, AOL – which owns its own content factory in Seed — announced a pronounced shift in strategy that will involve the hiring of “hundreds” of journalists over the next 12 months.

But for every dollar the Demands and Associated Contents of the world generate, it seems, there's a critic ready to rip their factory-like business models.

“The stories read like first drafts, poorly organized and indifferently written,” Jason Fry, a former WSJ.com reporter, said in an interview in June. “Which gets at my problem with Demand and AC: These stories essentially are first drafts, because the economics of Demand's business model dictate that's what they must be. The business model doesn't allow time for another round of reporting. It's assembly-line content.”

Those who call them “content farms” are “completely missing the point,” Demand founder and CEO told Jay Rosen in a recent interview. “We have significant editorial processes. We hire qualified professional writers, film-makers and copyeditors. Set clear editorial objectives and style guidelines for every piece. Require external sources with every submission. Copyedit what's been turned in. Fact-check it. Check it for plagiarism. Rate each piece so that writers get feedback.”

Soon, Demand will have Wall Street giving it feedback, too.

Click here to see the entire Demand filing.