Demand Media, founded by former Intermix Media (the parent company to MySpace) CEO Richard Rosenblatt, has quietly grown into a pretty large business, with rumored revenues of around $250 million, and profitable. It just so happens that what Demand Media is good at - generating lots of advertising impressions and creating niche social networks for media sites, may be a perfect fit for at least some of what ails Yahoo.
Which explains why Yahoo has approached Demand Media to acquire them in the last couple of weeks, say multiple sources close to the companies. The rumors started when someone spotted Yahoo’s new Head of U.S. Region Hilary Schneider leaving Demand Media’s offices in Santa Monica a couple of weeks ago. She was there, reportedly, to float the idea of an acquisition by the company, in the $1.5 - $2 billion range, say our sources. Scott Moore, who runs Yahoo’s content sites and is based in Southern California, has also reportedly been present at the meetings.
Demand Media, which refused to comment on this story, owns a large domain registrar called enom, which spins off a lot of parked pages (domains that are owned but do nothing but show advertisements). The ads that are shown on those pages are counted under the umbrella of “search marketing” and tend to generate very high fees. Demand uses both Yahoo and Google, but mostly Yahoo, for ads on those pages under a long term deal. When that deal is up, there’s a very good chance Google will win the business.
Demand also owns a number of large media sites, including ehow, trails and livestrong (along with dozens of others). All of these sites are heavy on content and generate a lot of page views and ad impressions. Demand Media also adds social networking features to those sites. They’ve historically used MySpace code to power the social networks, but have recently started to move over to Pluck’s social network product. Demand bought Pluck for a rumored $75 million earlier this year.
That means Demand nicely fills a number of holes in Yahoo’s current business. They have lots of ad impressions, including search impressions, to help Yahoo gain market share in those areas (and keep it away from Google). The vertical content sites fit into Yahoo’s strategy of owning content when it suits them. And the Pluck distributed social networking product also happens to fit squarely into Yahoo’s plans to build social into all things Yahoo.
The two companies have other connections as well. Goldman Sachs, which is Yahoo’s investment bank and has advised them all year on the Microsoft transaction, has invested $80 million or so in Demand Media (out of a total of $355 million raised). And Gordy Crawford, who owns a big chunk of Yahoo through Capital Research, is also a personal investor in Demand Media.
Our sources are saying Demand Media has rebuffed Yahoo’s advances so far, given the company’s uncertain future. And Rosenblatt reportedly is looking for more like $3 billion for his young but rapidly growing startup.
3billion? nooooo….. another broadcast?
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Mike, I think you mean “to help Yahoo gain market share in those areas (and keep it away from Google).
Dude, they are the clear leader in social media. They power almost every major company already.
http://www.pluck.com/customers/index.html
I hear they own domains so they can add content and social media and are already doing it. Millions of web sites over night. smart. No one saw them coming.
Any recent word on KickApps acquisition rumors? Last I heard they were pulling ahead of Pluck in many areas.
Yep they are one of the big leaders of Social media!
my thoughts on Demand Media
It’s indeed perfect for Y!
If Yahoo goes with this deal it will show that it aims to have a future on its own.
Demand is not a solid business. Good to see all the people pumping it up on TC though.
Sorry Mike. You must be staying up way to late if you think that a crappy company like Demand Media with crap properties and crap business ethics is a company to watch.
Seriously are they paying you - you should disclose your tax returns because they have to be paying you to say they could be worth anything more than $100. Have you seen their sites they are a basket case.
I’m really upset that you of all people would pass them off as a company to watch, they are the opposite of something of interest.
Seriously Mike… Are you equating parked domains that have pop-ups sold on the Right Media Display exchange with Search?
1.5 billion to buy their own Domain Registrar? Is a Domain Registrar the hole that Yahoo needs to plug?
I’m not buying this.
Luckily, I don’t have $1.5 billion, so, it isn’t really an issue whether I buy it or not.
Actually, Marchex.com makes a better acquisition target. And their market cap as of today is way below 500M
Mike, do you have figures for DemandMedia’s ad impressions?
$355M for doing what? This is more or perhaps similar to the JPL/NASA budget for the whole development of the recent Mars Exploration vehicles. But JPL scientists were developing real software & technology, ie, the cutting edge feedback control system software/hardware for the space vehicles, state-of-the-art DSP (digital signal processing) processors & embedded software for its communication systems, and so forth, in which the costs is justifiable, because of their complexities. Doing R&D to produce real software/hardware for the mission is very expansive.
I didn’t know that cutting-and-pasting HTML codes for building websites (yeah and all or most of the so called Web 2.0) costs millions? Its simply crazy to think that these internet companies worth more than say, General Electric.
tax returns will not show mike’s customers …$250 million is real seriuos revenue and exactly what oversee.net does and they have a $1 to $2 billion valuation or more as well….both stupid business and dumb overpaid people but it undeniably works…artibtrage is real on the web, until a regulation kills the domain buying and squatting fad or google decides not to spider these pages, as they are not relevant, which should happen sometime, better sell out now if that’s the main revenue generator you have
Do you think Yahoo is trying to build value? in order to be more appealing to Microsoft (and get a higher valuation). I don’t think they are serious about continuing alone… or are they?
yahoo will probably go with this deal…but microsoft will buy them
Nath
http://www.themostpowerfulcompany.com
Demand is not for sale
http://kara.allthingsd.com/200...../?mod=mktw
This proves that the search engines actually support abritrage. Neither Google nor Yahoo! have ever agreed to stop spidering them, so we all end up following the links to the pages.
Basically, the search engines are getting placed, paid search results right in the organic search results, and using the third party relationship (until this acquisition) to justify the continued existence of dead ends regardless of the poor user experience. If Yahoo! would move to acquire or even drop by for a visit then they are obviously loving this revenue stream.
The results of activity like this is garbage basically. Ringtones, porn, toner cartridges, mortgage scams, grey market software, torrent sites, etc are frequent participants.
Rise above, people….
Rebecca A. / Falafulu Fisi - you guys are clearly clueless about Internet traffic / Domain space…Direct navigation accounts from anywhere 17-21% of GLOBAL internet traffic and has x2 the conversion rate compared to product & search related engines. Want more data points?
- Average direct navigation traffic grew at a 35%+ compounded annual
growth rate (CAGR) between 2002-2006.
- Two-thirds of the world’s 1+ billion Internet users arrive at web
sites via direct navigation which accounts for 6-9% of PAID search market
Ronnie — see my comment above, even if Google kills indexing of parked pages the type-in traffic is still there and it’s KING… Always other ways to monetize similar to what MCHX is doing..
As for Broadcast.com analogy let’s stick to comparing apples to apples…Let’s not forget Demand Media owns Enom in April 06 and Bulkregister in July 06. As I said, before you comment away do some basic research…
HA! These guys wont even return phone calls or emails on any of my 12 requests to buy ads on their sites. They only run Adsense and other PPC crap and you think they are worth a B or 3 b’s?
OK I like their business but the reality is that the avg CPM is less than $1 and that does not translate into profits this quick.
Congrats to Richard. Here is a great video interview we did with him at PubCon 2007 in Las Vegas - http://www.reachd.com/ViewBlog/97/
Steve
what a racket - demand media is a deck of cards about to implode.who’s watch will it be under..? Yahoo, Google….here is the play - rosenblatt gets in touch with old mates such as armstrong - still under suspicion for steroid abuse - and uses their names to start so to speak social communities - in reality he has his staff at DM ask themselves questions on his chosen sites and then answer it aswell - this happens to alot of companies in the all difficult stage of getting off the ground, but none get given ridiculous evaluations of 3 billion……
If its anything like how rosenblatt played Verysign, got his mate to plug .tv for five minutes and thats the last we heard from the exciting duet……
ever look at the domain portfolio of demand?
eNom.com
eNomCentral.com
ChannelME.TV
Airliners.net
Answerbag.com
eHow.com
GreenCar.com
ExpertVillage.com
SoYouWanna.com
Allgetaways.com
GardenGuides.com
Golflink.com
Mountainzone.com
Runtheplanet.com
Run.com
Trails.com
Cracked.com
DailyPuppy.com
DemandStudios.com
Flowgo.com
Madblast.com
Demand Games
Arcadetown.com
Casesladder.com
Freewebgames.com
Gamedelight.com
Gamerival.com
Grab.com
Heavygames.com
MyLeague.com
i would hate to see the other names in there portfolio if this is the cream of the crop. appears to be a mix and match mumbo jumbo and does not make alot of sense as a network. my common sense tells me it would be better having a vast multi-channel family network of strategic keyphrase vertical domain channels to better integrate content and user experience.
more on KillerLocator.com
http://www.killerstartups.com/.....or-network
more on Demand Media
http://vator.tv/pitch/show/demand-media
I ran a test with Demand and was unimpressed. I didn’t see anything that differentiated them from the dozens of other “2nd tier” ad networks. $1+ billion valuation seems really unrealistic to me. Of course I thought that adify at $300M, blue lithium at $300M were both overpriced.
demand is most likely to ipo - rather than get acquired - they’re not a disruptive technology company - just a good findamental business - it won’t be a moonshot ipo - but as noted by mike and others - they are a real company with real revenue and real growth in the internet space - and that is not particularly common.
Traffic from demand has a poor conversion rate. Advertisers will not spend huge amounts of $ for that traffic.
A head of US region and manager of content sites are out scouting acquisitions of a company that is 90% revenues from domain sales and registrations?
More likely pitching the Pluck platform that they are already providing to other publishers. Why would a company on its death bed buy another whole company full of business units it doesn’t understand, to get a social template plug-in just like the one used by everyone else?
This is like the Madonna spin. Her manager is ARod’s manager so he gets her great seats to take her kid to a game. That means she’s fucking him and converting his faith to a cult.
Too funny.
This is clever spin from Yahoo, they’re saying to MS ‘look, we’re happy to do things alone’.
Microsoft will own Yahoo! by this time next year.
The GoogleGazer blog (http://googlegazer.com) takes a look at the big three (Google, Microsoft, and Yahoo) and concludes that Yahoo will be sold; they are merely haggling over the price. Substantial change is seen over the next few years and the Internet evolves from being browser-centric to “cloud-based,” supporting all manner of new handheld, industrial, and home devices. I think that Demand Media would be smart to sell out, but Yahoo would be ill-advised to buy it, as it’s whole reason for being may soon evaporate.
Well, Demand Media isn’t creating such great social networks. Infact, if you look at airliners.net, http://www.airliners.net/ you will see that many users have left the site or been purged since the acquisition of the site in the autumn of 2007. In order to see the Site Related, Demand Media has no made it so the general public cannot see it because it has gotten so heated. You can get a free photographers account and see Site Related for your self. It’s a mess. Purged users have created other sites that are rapidly growing in popularity one such site is http://www.airspaceonline.com/asotalk/
Demand runs its websites like dictatorship states, purging users who dare disagree with them.
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well, what will yahoo do with demand media? yahoo is itself on sale. and it has also said no to microsoft. well the stories repeat themselves, don’t they?