Wall Street Validates Demand’s Strategy

Written on
Jan 27, 2011 
Gavin Dunaway  |

money_small.jpgADOTAS - Demand Media may be a punching bag for most tech commentators and the symbol of content farm pollution in the search space, but investors like it, creative accounting and all.

The content-creation machine’s not-long-awaited IPO was a smash hit, as the share price rose 33% to $22.65 by the end of trading. While it originally planned to sell 7.5 million shares at $14 to $16. Demand upgraded to 8.9 million shares at $17. The company was valued at $1.9 billion when it was shooting for $1.5 billion.

Tech writers are incredulous that people would buy into a company that is seemingly dependent on Google (the source of nearly 30% of its revenue), especially after the head of Google’s anti-spam team blogged harshly about “content farms” and “spammy or low-quality content.” OK, it was a pretty vague threat, and the whole post was more a defensive piece about Google’s precious algorithm.

Alas, investors are suckers for numbers: estimated 2010 revenue of $230 million; comScore reported 67.3 million unique visitors to Demand properties in December; 13,000 content producers (writers, videographers, and so forth) spitting out 4,000 pieces of content a day… I hope nobody slipped in the drool puddles left by all the salivating investors.

In what could be called a victory lap, not-oft-quoted CEO Richard Rosenblatt took to The Wall Street Journal to decry that the term content farm — synonymous with Demand in most critics’ minds — is “insulting to our writers, insulting to the consumer, insulting to everybody.” He told All Things D’s Peter Kafka that Google was certainly not referring to Demand when fingering content farms and noted that Demand’s traffic improved after Google’s 2010 algorithmic upgrades.

Really? That may say more about Google’s algorithmic “improvements.”

But I’ll argue again the problem isn’t just with content farms — content on the web is growing increasingly crappier because it’s just churned out. Increasingly the Internet is a gigantic content farm. There’s little editing, no quality control — it’d be understandable if this was user-generated content, but the junk is coming from major media companies, ones with paid content producers. They’re throwing any crap they can online to get those treasured pageviews.

And now Wall Street seems to have validated the precept of quantity over quality when it comes to creating Internet content. Thanks guys — hope you make a lot of money.

A day after Demand’s IPO, Jeff Jarvis profiles Philip Parker of INSEAD, which is excelling in automated content production. Parker believes there’s not too much content out there, but too little — he’s right. Automated content creation so far is primarily filling in gaps in knowledge, registries, directories and other receptacles of information. Machines are writing the Yellow Pages, not “Hamlet.”

INSEAD is performing tasks close to Demand’s turf — it’s only a matter of time before a machine can not only churn out the how-to videos Demand has made infamous, but churn them out faster.

But good content is much more than that. Good content is a story. Good content is engaging. Good content makes you thirst for more.

Like most manufactured goods, it looks like content is going to get the Eli Whitney treatment — eventually the majority of it will be machine-created, but the hand-crafted stuff will not only be more valuable, it will last longer.

Gavin Dunaway is Editor, U.S. at AdMonsters, a leading trade publication, event producer and service provider for the online advertising industry. Previously, he had been Senior Editor of Adotas, where he arrived after years of ping-ponging around various industry publications. This Washington, D.C. native and George Mason University graduate also enjoys playing electric guitar so loud that the walls shake.

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