Demand-Media

Demand Media's Q1 Revenue Beats The Street; Up 48 Percent To $79.5 Million

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Content platform Demand Media reported its first quarter 2011 results today, reporting revenue of $79.5 million, an increase of 48% compared to $53.6 million in Q1 2010, beating analyst expectations of $69.49 million in Q1 revenue. The company reported a net loss of $5.6 million compared to a net loss of $4.1 million in Q1 2010. Net loss per share was $0.13 compared to $0.94 in Q110.

In a statement, CEO Richard Rosenblatt said: “We reported better-than-expected results in Q1 2011, driven primarily by continued momentum from our owned and operated sites…We also continued to invest in Demand Media’s long-term success, enhancing our consumer offerings through new partnerships with Rachael Ray, Tyra Banks and Getty Images. We believe our publishing platform is the most comprehensive and effective of any online publisher and our focus on delivering relevant, valuable content that makes consumers’ lives better will continue to drive our success.”

Other stats from the earnings release:

• Content & Media Revenue was $51.9 million, up 72% compared to $30.2 million in Q110.
• Traffic acquisition costs (TAC), which represent the portion of Content & Media revenue shared with Demand Media partners, was $3.2 million,
or 6.2% of Content & Media revenue, compared to $2.7 million, or 8.9% of Content & Media revenue in Q110.
• Content & Media Revenue ex-TAC was $48.7 million, up 77% compared to $27.5 million in Q110.
• Registrar Revenue was $27.7 million, up 18% compared to $23.4 million in Q110.
• Investment in Intangible Assets was $14.2 million, up 40% compared to $10.2 million in Q110.

All eyes are on Demand’s revenue this quarter after Google issued its “Panda” update to search results, which aimed to weed out low-quality content sites from search.This could affect Demand content’s rank in search results and take a chunk our of the company’s top line. Demand just went public a a few months ago, raising $151.3 million in its offering.

CFO Charles Hilliard said that “Outperformance in Q1 was driven by ongoing revenue growth from our content library, combined with strong direct brand advertising sales.”

The company also announced that it is taking measures to clean up its content, and will be improving the quality of content posted on its platform going forward. For example, one of the company’s largest properties, eHow, has removed a number of low-quality, user-generated articles from the site.

On the earnings call Demand Media said that it looking to improve the quality of its content. The company confirmed that the changes in Google’s algorithm affected eHow’s traffic, with visits to the platform down in the past quarter. “Google is a very important partner for us and we consider ourselves as white hat,” says Rosenblatt, referring to SEO advertising traffic.