Los Angeles based Demand Media, a sprawling network of content sites (that was a big part of a post yesterday on the end of hand crafted content), is rumored to be shopping itself to the big Internet companies. A couple of sources have told us that they’ve recently been talking with Yahoo, AOL and Google about an acquisition, and would like to exit for $1 billion or more.
Those rumors are false, says CEO Richard Rosenblatt via a phone call this morning. He confirmed that discussions have happened, but says it’s other companies that are initiating the conversations. “I’m so excited about Demand Media’s position in the marketplace and its prospects. Why the hell would I want AOL or Yahoo stock?” he said.
And he certainly has a point. The company says revenue rumors in the $200 million/year range aren’t far off (although last year the rumors were $250 million). They have 520 employees and Rosenblatt says they’ve always been profitable. → Read More
Richard Rosenblatt was the Chairman of MySpace at the time that it and parent company Intermix were sold to News Corp. in 2005. He is currently the founder and CEO of Demand Media, a Los Angeles based social media company that has raised over $350 million in capital. We asked him to write a guest post giving advice to the new MySpace executive team. You can follow Richard on Twitter at twitter.com/demandrichard.
My Insider Perspective from the Outside
When Michael asked me to guest write this post, I hesitated because MySpace’s new management team is extremely capable and will determine their own path to restore the company to its glory days. But after fielding dozens of calls and hearing erroneous comments being attributed to me, I decided to weigh in with the hope of providing some general thoughts for the team to consider as they embark on their journey. I’ve never been a fan of armchair generals so I’ll refrain from giving specific operational advice – I am not in the trenches and haven’t been involved in the day-to-day operations for several years. We had our share of challenges, but in the end we prevailed, and I wish the same success for the new MySpace team – as well as all entrepreneurs entering the social media space.
Keeping past experiences in mind, here are some general thoughts on where MySpace can push forward: → Read More
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 → Read More
This news has been simmering for a while. When Ross Levinsohn (pictured left) resigned as the President of Fox Interactive Media late last year it was rumored that he intended to raise a large fund to acquire Internet startups. He soon partnered with Jonathan Miller, the former Chairman and CEO of America Online and the two have been out raising capital for the last few months. Their new entitiy is called Velocity Investment Group. They’ve found their partner – $15 billion hedge fund General Atlantic. Details on the amount of capital committed to the new fund are scarce, but General Atlantic issued a press release today announcing that Levinsohn and Miller have become advisors to the fund. The timing is interesting – 5:14 pm EST on the Friday before the long weekend. The press was circling on this story, and the release was obviously made to preempt the news from breaking. More news should be coming next week as details leak – size of the fund, etc. The new venture will compete with Demand Media and others for acquisitions. Demand Media, which has raised $220 million in capital, was founded by former Intermix Media CEO Richard Rosenblatt. Ironically, Intermix Media, the parent company to MySpace, was acquired by Fox during Levinsohn’s tenure there. Update: We beat the WSJ by 16 minutes on this one. Their story is here. → Read More
