Friday, January 21

Demand Media IPO and Google

Online Stock Trading - Demand Media IPO, eHow, Content Farms and Google's Blocklist Extension

UPDATE 2 : After Google's much hyped 'farmer update' in which it is claimed that Google would be weeding out content farms from its search results, the world of Internet Marketing has been shocked to discover that eHow, considered by some to be the biggest content farm of them all, has not been weeded out along with the rest - ezinearticles, associated content, hubpages, articlesbase, etc... have all suffered big hits, but eHow has actually improved in the search results !

Aaron Wall from SEOBook says :
Article directories and topical hub sites have been online since before eHow was created. But eHow's marketing campaign was so caustic and so toxic that it literally destroyed the game for most of their competitors.

And now that Google has "fought content farms" (while managing to somehow miss eHow with TheAlgorithm) most of Demand Media's competitors are dead & Richard Rosenblatt gets to ride off into the sunset with another hundred million Dollars, as eHow is the chosen one.

Long live the content farm!
So it would appear that Google has done a sterling job for eHow and has not whacked it as many, including myself, were expecting. Google has decimated Demand Media/eHow's competition ! Now I wonder what that will do for the Demand Media share price ?

Demand Media (DMD) share chart since the IPO

UPDATE 1 : Matt Cutts from Google has just announced on their official blog that Google has introduced a new extension for their Chrome browser which allows users to create a blocklist to block any site that they no longer wish to see in their search results. The aim is to allow users to block what Google refers to as 'content farms' i.e. 'sites with shallow or low-quality content'. If you install the Chrome blocklist extension and use it then ther esults will be sent back to Google, who will then study the resulting feedback and may use it to tweak their page ranking systems.

This means it will be easy for users using Chrome to block so-called content farms (you have to block the whole site, not single pages)but it also means that there is apossibility for unscrupulous sites to go around the Internet blocking their competitors. So it seems this is a first shot in Google's battle against content farms, but how effective it is remains to be seen. Watch this space,as they say.
****** End of update ****

According to those in the know, Demand Media's IPO will take place later next week, after its investor road show.

It will trade as DMD on the NYSE with its shares expected, at the moment, to be priced at $14 to $16 each. It could sell up to 8.625 million shares and raise about $138 million with a worth of around $1.3 billion.

So is Demand Media a good investment ?
Well, I'm not an investment advisor so I'm not advising anyone. But bear in mind the risk factors as stated by Demand Media "We are dependent upon certain material agreements with Google for a significant portion of our revenue. A termination of these agreements, or a failure to renew them on favorable terms, would adversely affect our business."

Demand Media makes a lot of money from Google's ads that appear on its various sites. It produces content through Demand Studio on a variety of web properties notably eHow, LiveStrong, Cracked, GolfLink, AnswerBag, and People visit the sites for the content but a proportion of these visitors end up clicking on the ads and making Demand Media (and Google) quite a lot of money in the process.

These content sites are generally ranked quite highly at the moment in Google's pages, which is why they get so many visitors. If anything were to happen to cause these sites to get less visitors, then the company's revenues would be affected, possibly quite seriously.

Today (Jan 21) Matt Cutts from Google has just written an article entitled "Google search and search engine spam" - some people are taking this as a veiled attack on sites such as Ehow which some describe as "content farms" i.e. sites which contain low-quality content (the creation of which is farmed out to other people) but the right keywords to rank highly according to Google's algorithms. If Google is intent on a re-rating of such content farm sites, then Demand Media could find itself taking a serious hit on its revenues.

Points to bear in mind -

Wired magazine has criticized eHow and Demand Media, saying their content is "slapdash" and a "factory stamping out moneymaking content".

Wikipedia has blacklisted all eHow articles, which must mean something, given Wikipedia's high reputation :-).

I would expect to hear more about this in the coming days. It has already been mentioned on CNBC and with the Demand Media IPO not far away, the discussion could get interesting.

If such content farms were to be re-rated by Google, then humble blogs such as this one might actually rise higher through the ratings as a result !

If you came here looking for the share tips from Thursday's magazines and newspapers then you should click here

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