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Summary:

Demand Media may have announced a successful IPO, but that didn’t quite dispel the air of controversy surrounding the company. But while Demand’s business model may be a little shaky, it’s worth monitoring for lessons in content creation efficiency and targeting, and for potential partnership opportunities.

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Demand Media may have announced a successful IPO, but that didn’t quite dispel the air of controversy surrounding the company. After all, Demand has never been profitable as a business. The company and its content farm brethren are blamed for diluting search results, and its content is damned as being filler produced at near-slave wages. But the controversy is overstated: Demand’s business model may be a little shaky, but it’s worth monitoring for lessons in creating content efficiently and targeting content, as well as for potential partnership opportunities.

Demand produces low-cost content to order based on its analysis of search trends, advertising rates, competitive content and the content’s long-term value in terms of ad sales. It suggests topics based on that algorithmic analysis to a network of 13,000 freelancers. Those freelancers then write articles or make videos that Demand shows on its own highly search-optimized sites — eHow, Answerbag, Livestrong.com and Trails.com — or syndicates to partners like the San Francisco Chronicle and the NFL.

The content is at least mildly useful to the masses. Otherwise, Demand wouldn’t be generating CPC revenues or enough clicks and links to influence Google results. Demand’s revenue per thousand page views on its own sites is showing modest growth, indicating the company is starting to move beyond low-CPM text ads into higher-value advertising.

This cheap, clinical approach to content creation inevitably offends journalists, and produces a lot of how-to articles of varying quality. But there are several ways Demand may be able to evolve its content farm:

  • Verticals. Some Demand properties align celebrity brands with topics (Lance Armstrong-health, Tyra Banks-beauty), but the company hasn’t invested much in higher-quality content in other verticals like technology or food, or for older audiences that could command premium advertising.
  • Sponsored Content. With just a little polishing, Demand could apply its model to advertorial-like sponsored content and combine that with the social media tools it acquired via Pluck for advertisers.
  • Q&A and Content. Blending community-answered questions a la Quora with a content farm seems a natural fit – Mahalo may be steering this direction with video already.

Currently Demand’s dependence on Google for revenue is a little worrying, and the company will need to examine that if it is going to evolve its business model. I discuss that relationship, along with other strategies, in my weekly update at GigaOM Pro.

Image source: flickr user Klearchos Kapoutsis

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  1. I think there are potentially alot of differences between the way Demand Media do content, and the way content should be done. I recently did an interview with Andy Chen, CEO of Preview Networks and got his thoughts on this.

    You can check it out on my blog, but Andy raises really salient points about what content should be, who should maintain quality etc.

    http://digigen.co.uk/2011/01/31/the-future-of-content-andy-chen-ceo-of-preview-networks/

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  2. Do Google have a duty to take Demand Media content farms, such as eHow, out of their index?

    I went to the doctor recently, who used an eHow article (via a Google search) to diagnose me! Scary scary stuff…

    http://www.epiphanysolutions.co.uk/blog/nhs-show-support-for-demand-media-ehow-against-google-attack/

    Paul

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  3. Matt: I suspect there will always be varying degrees of quality in content, with the appropriate business models to drive them. As someone who gets paid to write, I hope the market will support “high-end” products. I confess I’m nervous about investigative journalism, and hope it doesn’t have to rely on the kindness of strangers and well-heeled families alone.

    Paul: Google should do what’s right for its business – I’m not worried that it will figure out how to properly weight quality in its results in time. I’m more worried about your health, though….

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  4. It seems that as people depend on search for finding quality results, if those results are producing worse quality, the search engine is also flawed. However, in near monopoly environments where everyone just makes a choice without thinking, maybe the results over time just get worse and worse without anything noticeable for most users.

    Makes you wonder how bad it’s already gotten, how much farther to go before eventually getting better. Maybe the IPO will be a good thing to shed some real light on the activities, we’ll see.

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  5. [...] big money: Demand Media went public recently, and AOL’s leading the charge with its low cost Seed.com service and, arguably, its $315 million [...]

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  6. [...] EVP Product at Demand Media gave an excellent talk on building great (consumer) products. Given the controversy around Demand, I wasn’t sure what to expect. But the points Joe made are well worth sharing and I finally found [...]

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  7. I find eHow’s model brilliant, and I don’t see their articles as spam, sure some articles are totally useless but many of them actually help ordinary people with everyday problems.

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