Demand Media Announces Closing of IPO
Last week, Demand Media launched its initial public offering. Today, the company announced the closing of the IPO of 10,235,000 shares of common stock at $17.00 per share. From the release:
Demand Media sold 5,175,000 shares of common stock, and the selling stockholders sold 5,060,000 shares of common stock in the offering. Demand Media received net proceeds of approximately $77.2 million from the sale of its shares, after deducting the underwriting discount and estimated offering expenses. Demand Media intends to use the net proceeds for investments in content, international expansion, working capital, product development, sales and marketing activities, general and administrative matters and capital expenditures. Demand Media will not receive any of the proceeds from the sale of shares of common stock by the selling stockholders.
After the launch, it didn’t take long for Demand Media to rack up a valuation surpassing even the New York Times, with a market cap of $1.8 billion, according to reports.
The question still remains, however, whether Demand will be able to live up to its high valuation, with a model that greatly depends on Google, who has been talking about shifting the focus of its webspam reduction efforts to "content farms". It’s been debated whether or not "content farms" refers to sites such as those from Demand Media, and I’m not going to repeat the spiel here. If you want to see a variety of takes on the topic, read the following articles and reader comments that go with them:
The bottom line is that Google has been silent on whether or not Demand’s sites are considered content farms by their standards, though a simple Google search for the phrase "content farm" will bring you up numerous results mentioning Demand Media.
We may see more quality content (or at least content perceived as such) coming from Demand Media in the future, as the company will reportedly seek to acquire premium content sites. They’ve already tapped celebrities (like Tyra Banks) in the past, so it would not be surprising to see more moves like that.