Demand Media Files to Go Public – Demand By the Numbers
Friday, August 6th, 2010
Demand Media files for IPO, with Goldman the lead banker.
Demand Media, the parent company of eNom, has filed to go public and raise up to $125 million. I’m reading through the S-1 as we speak, so this article will expand. Here are some of the details:
-The company generated $198 million in revenue last year, and $114 million through the first 6 months of 2010
-The company reported a net loss of $22 million last year and $6 million through the first 6 months of 2010
-It had $33.5 million in cash at the end of June, and total assets of approximately $469 million.
-Registrar revenue for the first six months of this year was $47.7 million; content & media revenue was $66.3 million
-The company depends on Google for its ad revenue, with 26% of its revenue in the first half of the year coming from Google. Demand’s agreement for parked domains expires in the first quarter of 2011 and for developed sites ends in Q2 2012
-In addition to relying on Google for much of its revenue, a risk factor is that Google will compete more with the company in content creation
-40% of page view traffic to Demand’s own web sites in Q2 2010 came from search engines
-21% of company’s revenue in first half of this year came from eHow — and 60% of eHow’s traffic last quarter came from Google.
-A risk factor is perception of brands — one example is the Livestrong.com brand, which could take a hit if Lance Armstrong’s reputation does.
-Risk factor is liability with its portfolio of domain names, which may infringe on others’ trademark rights (although the company says it screens for that).
-Domain registrations accounted for 37% of total revenue in first half of year. Renewal rate on domains is 73% this year, but was 69% all of last year.
-If rules for acquiring expired domain names change, it could hurt the company
-The company uses your domain name look-ups for its own purposes: “In providing registration services for over 10 million domain names, our Registrar resolves an average of over 2 billion domain name system queries per day. Our Registrar also serviced, on average, more than 3 million domain name look-ups per day from potential customers seeking to register new websites or purchase existing domains during the first six months of 2010. These queries and look-ups provide insight into what consumers may be seeking online and represent a proprietary and valuable source of relevant information for our platform’s title generation algorithms and the algorithms we use to acquire undeveloped websites for our portfolio.”
-In case you didn’t know this already, Demand Media owns “Acquire This Name”. Here are all of the company’s subsidiaries.
Further Reading:
Andrew
I haven’t had a chance to look at the filing, but does it break down the revenue from eNom or just put it all in together? ie. domains, hosting, SSL etc.,
@ Michele – all together from what I can tell. Does say how much it makes from expired domain agreements with other parties, though.
@Andrew – thanks for the clarification. Between you and Kevin tweeting the highlights I feel like I won’t need to read the actual documents
Lots of goodies, including the costs to acquire various businesses (Pluck, etc.), in the filing.
@ George – they lumped together a bunch of their acquisitions into one amount, though. I’m assuming HotKeys was in that amount.
Post over on thedomains.com says they’ve never made a profit …
Someone realized they need to cash out by selling to suckers or lose everything. They are one Google algo change away from going bankrupt
okay …
2009 net loss of $22 million
2010 6 mil so far .. 12 mil entire year ??
the company depends on Google for its ad revenue, with 26% of its revenue in the first half of the year coming from Google.
So without google it wouldbe 26% worse …
I am glad i do not have any domains at Enom.
If i had i would transfer them right now .
this does not sound healthy at all.
It doesn’t sound unhealthy to me. The reason they lose money is because they’re investing substantially in the business, paying for content that has a great long term ROI.
The concern about Google is valid, but with the company’s traffic I’m sure Microsoft would love to take the biz if it could.
Just check p. 80 of SEC filing before claiming: “long term ROI” !
Comparing 08 and 09, after adding large quantity of content, they lost page views, with constant eCPM, thus their ability to make money out of content on longer term seems rather false.
On page 104, they speak of “Amortization of intangible assets”, what may mean the cost of content production is amortized, thus their ability to make money out of content less evident.
The key is they have a lot of competitors, and almost no technical barrier (any serious developer understand immediatly their algortihm).
Furthermore, up to my experience, (1) they don’t get a better eCPM you can do with duplicated content, and (2) even if you can find a supposed topic with ad value and content hole, it doesn’t mean you will catch it.
I think the biggest problem in their approach is that they have to produce the content, which is a high starting cost ($20 x millions of articles is a lot), before being able to verify the ROI. As a conclusion, they have a very high content ROI testing approach.