Thursday, October 20, 2011

Demand Media

I own no Demand Media stock but was nonetheless disappointed, though not surprised, when Business Insider wrote today that the "company's stock has completely collapsed, closing yesterday at $5.60 a share". This slide has been widely attributed to changes in Google's Panda algorithm and internal problems at their eHow site. Presumably the former, rather than the latter, had more to do with this slide.

My publishing background includes about a dozen years editing special-interest magazines at Rodale, including Bicycling, Mountain Bike, Scuba Diving, Organic Gardening and others. I came to believe that special-interest magazines in particular had a powerful bond with readers and a utility and this compact could not be easily replicated. I admit there was some arrogance on my part that often flew in the face of market research and what proved to be excellent advice from the direct marketing and single copy sales folks. And editing a special-interest magazine is not exactly rocket science. It took me too long to realize that a tomato could be an Organic Gardening cover subject month after month without the business collapsing or me losing my bonus.

I have written positively about Demand Media at this blog and at, for both strategic and business reasons. I saw the company as a disruptor while acknowleding that it could still be a race to the bottom. I recall presenting Demand executives at a magazine industry event more than a year ago and fondly recall some of the venim displayed. Later I spent an afternoon at their LA offices and received a lesson in how a data and research-driven content company could work. Much as it might make us uneasy, magazines can probably learn from an intense data-rich approach that is almost pathologically reader-centric. This was SEO on steroids.

Of course, every company has a shadow side and contains the seeds of its own destruction. After all, how many useful 500-word articles can one write about screwing in a lightbulb, an exercise that becomes an joke before the word limit is met. I saw logs of some writers who has written more than 5,000 articles for Demand. Somehow that seems more like a lifetime of work and probably feels like it too. We are all in trouble when a point-of-view is lost and we are reduced largely to nouns, verbs and meta-data.  

But I have been struck at how good some of the writing has been and Demand's ability to bring in a crop of impressive freelancers, a task certainly aided by the current business cycle.  Editors of special-interest magazines have long known that their deeply engaged readers can know as much about a subject than the inside editorial team. I think International Data Group computer titles have exploited this reality for a powerful business advantage, monetizing the writings of the experts among them. And this advantage helped IDG move from a print-centric company to a more robust digital media company. In my opinion they have done this as well as anyone.

Demand has been trying to move up the content food chain so they won't be as vulnerable to changes in the Google algorithm and suffer the requisite scorn from the producers of serious content.  I suggested some time ago they move into the health, fitness and medical fields, in particular, as these sectors seem evergreen and attract consumers who tend to pay for content. But whether they can move "uptown" and bring their low-cost content model with them remains to be seen.

I have been reading an interview by Eric Enge with Peter Norvig, Director of Research at Google ( I think everyone at Demand Media might want to read this as it's a fascinating look at how search is evolving and the technology approaches that are driving it. Enge notes that "Google tests tens of thousands of algorithm changes per year, and make one to two changes every day. Test is layered, starting with a panels of users comparing current and proposed results, perhaps a spin through the usability lab at Google, and finally with a live test with a small subset of actual users." 

Business Insider notes that Demand Media "has begun to focus on creating less and higher-quality content and on trying to develop social and direct distribution to reduce it's dependence on search." In the above interview Director Novig says,"the Google you're using this year is improved quite a bit from the Google of last year, and the Google you're using now is radically different from anything you used ten years ago."   

If there is time, Demand Media is probably smart building a business that is less reliant on the vicissitudes of search.


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