Working Through the DM Prospectus

I want to work my down through the Demand Media IPO prospectus, starting with:

"Our mission is to fulfill the world's demand for commercially valuable content."

Whoa! That's ambitious. Not as ambitious as Google, who wants nothing less than to organize all the world's information. But it's a pretty danged big bite of the pie, just the same. Can they do it? That depends on their strategy for growing their business.

Depending how you count, Demand Media consists of two, or three, or four distinct business segments.

First is their Registrar business. DM owns eNom, a large website registration business that registers about 10 million domain names a year; domain names earn the company about $10 bucks a pop. DM owns about another half million domain names outright.

Second, is what DM calls their "Content & Media service offering". You can count this as one business segment, if you like. You can count it as three distinct operations, they way DM does:

• Content creation
• Social media applications
• Monetization tools

From what I can tell, though, the "monetization tools" isn't a business service, so much as what DM uses to make money on content creation.

And the "social media applications" is a reference to Pluck, a DM service that powers forums and online communities (and didn't do a very good job of it at eHow) and seems to be a very minor part of DM's overall revenue...the Prospectus doesn't even mention any income generation from this aspect of their business.

So to my mind, we're left with two key businesses at DM, the Registrar and Content Generation. And even though the Registrar has accounted for as much as half of DM's income, to my mind, it's the content generation piece that is the future of this company. It's right there in their mission statement, after all: fulfill the world's demand for commercially valuable content.

More on that later.