Demand Media released financial results for the first quarter of 2011 Thursday; the company saw gains in revenue and losses from operations in comparison to the same quarter last year.
“We reported better-than-expected results in Q1 2011, driven primarily by continued momentum from our owned and operated sites,” Richard Rosenblatt, chairman and CEO of Demand Media, says in a news release.
Revenue was $79.5 million, an increase of 48 percent compared to quarter one (Q1) of 2010, which boasted $53.6 million. However, loss from operations was $4.2 million, there was a $3.2 million loss from operations in Q1 2010, according to a news release from Demand Media.
The total net-loss for this quarter was $5.6 million compared to a net loss of $4.1 million in Q1 of 2010. Content and media revenue was up to $51.9 million—a 72 percent increase—in comparison to Q1 of 2010’s $30.2 million.
“We are off to a great start in 2011—reporting record quarterly revenue, stronger than expected adjusted OIBDA and over $19 million in cash flows from operations in the first quarter,” Demand Media’s president and CFO Charles Hilliard says in a news release.
Traffic acquisition costs was $3.2 million, it represents the portion of content and media revenue shared with Demand Media partners. About 6.2 percent of content and media revenue came from traffic acquisition costs, compared to $2.7 million or 8.9 percent in Q1 of 2010.
Cracked.com’s Facebook fan base surpassed the one million mark while the owned and operated Demand Media sites saw a 32 percent increase in page views from the same quarter last year.
“Outperformance in Q1 was driven by ongoing revenue growth from our content library, combined with strong direct brand advertising sales,” Hilliard says in a prepared statement. “Our raised fiscal 2011 guidance reflects our better-than-expected first quarter results as well as our continued reinvestment in content and diversifying sources of traffic and revenue.”
Demand Media also announced Thursday that the group will be making changes to its content by including more feature length stories that provide original editorial copy. Writers of these stories will be paid between $80 and $350, up from the usual $15 for shorter 500 word pieces, and the platform will support line edits, rewrites, photo treatments and it will automatically check all content for plagiarism.
Jeremy Reed, senior vice president of editorial at Demand Media, acknowledges these feature changes were in part a response to Google Algorithm changes.
“Google makes smart decisions and it makes us smarter because we do get a portion of our traffic from search but every time they do something it really does make us smarter and forces us in the right direction. But, the right direction has always been this long-term strategy that we’ve had. It wasn’t one day we were a sandwich shop and now we’re selling tires,” he says.
For Reed, expanding sites to include longer form journalism was always an obvious choice.
“What we realized and what we kind of always knew is that we needed to develop a fully realized editorial strategy. There has to be content for things we could answer, especially in 500 words, but also content that had more of a story arch, content that we interviewed people for,” he says.
Editorial directions will be driven, in part, by Demand staff.
“Writers will bring in pitches but we’ll also be developing pitches with the editorial leads,” says Reed. “We’re working with our community of feature writers to find out who’s the best person to do what.”
The new story format will require writers to incorporate original reporting, exclusive quotes, sidebars and they will have word counts north of 850 words. Editors will also spend more time with writers and a story because content will approach more complex subjects.
“There’s only so much time you need to spend with [topics like] ‘How to ripen an avocado.’ You get in there, you get it ripe and then you leave. Something like a bigger topic to wrap your mind around and then wrap the audience around—something like wedding trends for 2011 (needs more editorial time) just because of what we’re trying to achieve for the audience, it’s just a little more difficult so we’ll spend some more time.”
The price increase should silence some critics of Demand Media, who have called it a “content farm” for not paying freelancers more.
“One of the things that we’ve always done as a publishing company, and it’s important to us, is being completely transparent about what we pay. You know exactly what the opportunities are, we tell you exactly what the requirements are and hopefully it’s a great marriage. The $80 to $350 (feature payment) that takes into account how difficult it is to write, what experience do you bring, do you have an aggressive turn around time,” he says, adding, “We’re trying to do the right thing, sometimes we make missteps but we are trying to figure out a way to tap into the very talented people that we know are out there.”