Wednesday, August 11, 2010

Demand Media's Library

"Our wholly-owned content library consists of approximately 2 million articles and approximately 200,000 videos as of June 30, 2010, and during the quarter ended June 30, 2010, we produced an average of over 5,700 new high-quality text articles or videos per day."

DM's library is their bread and butter, at least on the content side of the business. They have 2.2 million articles and videos at the moment and at almost 6,000 new pieces a day they'll add (do the math!) another 2 million per year. In other words, by June 2011, their content library will have doubled, and perhaps their content revenue will as well.

I write for Demand Media as a freelancer, and they pay me $15 per article (I try to write them in about 20 minutes, but don't always make it).  There's a slew of title selection folks and editors that also put their hands on each article, so let's say DM's upfront cost for the articles I write is about $20.

They also pay a few writers more for premier articles and pay many writers less (much less) for shorter blurbs that are only 50 words or so. Let's say an average piece, then, costs the company about $10. Their 2 million new articles a year will run them $20 million in upfront cash. (I'm not sure where this cost appears in their prospectus...the "service costs" and "product development" line items are the right scale, but the descriptions of these categories don't appear to cover writers' fees. Anyone know?).

Most of DM's material is on eHow at the moment, although that looks to be changing in the years ahead. eHow hosts 1.4 million (out of 2 million) articles and 150,000 (out of 200,000) videos. eHow also accounted for 21% of DM's total revenue in the first half of 2010, and since half the company's income come from their registrar business, eHow looks to have accounted for more than one-third of revenue on the content side of the business.

 By the numbers, it looks like this:
  • $114.0 million...Total 6-month DM revenue (through June 2010)
    • $ 66.3 million...Revenue from content side of the biz
      • $ 23.94 million...eHow's contribution (21% of total, 36% of content)
    • $ 47.7 million...Revenue from registrar side
eHow is a top-20 ranked website in the U.S. and will play a large role in DM's future. They've even launched an eHow-UK site that gets 2.5 million unique viewers a month. It's hard to glean what the future cut will be between eHow content and content for other DM properties and customers, but in 2Q 2010, only 60% of new content went to eHow. For the moment, content at eHow does better, revenue wise, than content at other DM sites, but I'm sure the company hopes to change that down the road.

'Til next time...

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