(WEB HOST INDUSTRY REVIEW) — Demand Media (www.demandmedia.com), which creates online and provides domain name registration services under the eNom brand, has filed for an initial public offering of shares with the US Securities and Exchange Commission.
According to Demand Media documents filed late last week, the net proceeds from the IPO will be used for investments in content and general corporate purposes, including working capital, sales and marketing activities, general and administrative matters, capital expenditures and international expansion.
Demand Media initiated its operations in April 2006 with the acquisitions of “how-to” website eHow.com, and domain name registrar eNom. Since its launch, Demand Media’s revenue has come from the sale of advertising in connection with its content and media services, and through domain name registration subscriptions. Its content and media service currently outperforms its domain business. It remains to see, however, if this has been a profitable business.
For the year ended December 31, 2009, revenue was $198 million, and for the six months ended June 30, 2010, it was $114 million, however, net losses for the two periods were $22 million and $6 million respectively.
The majority of its advertising revenue during the first half of the year, the company said, was generated through its relationship with Google on a cost-per-click basis. Demand Media notes that while Google handles direct relationships with the advertisers, this reliance on one PPC provider could be a potential risk if the relationship changes. “If any of our advertisers, but in particular Google, decided not to continue advertising on our owned and operated websites and on our network of customer websites, we could experience a rapid decline in our revenue over a relatively short period of time,” the company stated.
Demand Media announced in April it had named former Mandalay Entertainment Group chair Peter Guber, and Adobe Omniture senior vice president and general manager Josh James to its board of directors, which the company said would bring “significant operating experience and expertise in creating content, captivating audiences and using data to better understand online behavior.”
Signalling that there is interest in the “content mill” strategy similar to Demand Media’s, Earlier this year, Yahoo bought Demand Media competitor Associated Content.
