Demand Media’s Money Shot

There’s a defining line between those who read this and are awed and those who puke a little in their mouth:

The assignments are generated via proprietary black-box technology, which sifts through data on what people are typing into search engines, compares the search queries with keyword advertising rates, and then analyzes how many websites are already serving that particular market. If after mining the data the algorithm determines that a certain headline for a specific topic, no matter how obscure, will be profitable, it pushes the idea into the pipeline.

via Demand Media’s Planet of the Algorithms – BusinessWeek.

An advantage that Demand Media has created is that they’ve convinced investors on their story of how they fit into the new online paradigm (“we are the future of media”).  So their financials don’t matter so much right now.  As long as old companies like NYT continue to flail, the better the story gets.



2 thoughts on “Demand Media’s Money Shot

  1. Would love to have my hands on an algorithm that can predict certain revenues even while Google’s underlying relevancy algorithms shift consistently. And how well do those crystal ball algorithms work in 2 or 3 years if Google starts to mix a lot of ebook content into the search results? Oooops. 😉

    Reading that line I am reminded that their CEO consistently sells at the tops. He is a killer salesman. But it is better to invest early with him than late with him.

    Of course there is not only Google, but also other market participants crowding out some of the same spaces Demand is in. Some are doing so at far higher margins than Demand has…look at sites like WiseGeek that are self funded & super profitable.

    And then Demand competes with itself across its suite of sites & content they syndicate to other sites too. I don’t see a margin expansion story or an economy of scale story because most everything they do can be done elsewhere cheaper, and the data angle doesn’t even sound very interesting when you consider that Yahoo! owns a content mill and over 10% of the search market.

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