AP News

Demand Media's posts 1st profit since IPO


SANTA MONICA, Calif. (AP) — Demand Media Inc. eked out its first profit as a publicly traded company as it offered better content and ushered in more traffic and advertising to a network of websites that includes eHow.com and Livestrong.com.

Demand said Tuesday that it earned $94,000, or less than a penny per share, during the three months ending in June. That compares with a loss of $2.4 million, or 3 cents per share, at the same time year.

The results for the latest reporting period marked the first time that Demand Media hasn't suffered a loss since it completed its initial public offering early last year.

After the IPO, investors initially snapped up Demand Media's shares and briefly propelled the company's market value above traditional publishers such as The New York Times Co. The buying frenzy reflected a belief that Demand Media's reliance on low-paid freelancers to write short articles about perennially popular topics on the Internet would prove to be a game-changing formula.

But perceptions about Demand Media's prospects quickly dimmed just a month after the company's IPO. The reason: Google Inc. tweaked its influential search formula to weed out websites featuring content deemed to be shallow or deficient by Google's ranking system. Much of Demand Media's material was denigrated in Google's revisions, relegating its websites to the back pages of the search results that provided much of its traffic.

Demand Media has been adapting to the changes by producing longer articles and setting up its how-to video channels on YouTube and other online outlets.

Michael Blend, the Demand Media executive who orchestrated the company's content upgrades, is being rewarded with a promotion. The company, based in Santa Monica, Calif., said Tuesday that Blend is now its president and chief operating officer. In his new role, Blend's responsibilities will expand to include oversight of the side of Demand Media's business that registers website addresses.

Despite Demand Media's recent strides, the company's stock remains well below its IPO price of $17 as well its trading peak of $27.38. The shares rose 37 cents, 3 percent, to $12 in Tuesday's after-hours trading.

If not for certain accounting items unrelated to its ongoing business, Demand Media said it would have made 9 cents per share in the second quarter. That figure was 2 cents per share above the average estimate among analysts polled by FactSet.

Revenue for the period totaled $93.1 million, a 17 percent increase from a year ago.

After subtracting commissions paid to Demand Media's advertising partners, the company's revenue came to $88.7 million. That was about $1 million above analysts' estimates.

For the current quarter ending in September, Demand Media forecast adjusted earnings of 9 or 10 cents per share on revenue of $90 million to $92 million, excluding advertising commissions. For the full year, Demand sees earnings of 35 to 37 cents per share on revenue of $355.5 million to $359.5 million.


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