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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