Demand Media buying art website Society6 for $94M
As part of its effort to find new revenue sources, Demand Media has bought the website Society6, where customers can buy art prints, T-shirts, phone cases and other items, for about $94 million in cash and stock.
Demand Media on Monday also cut its revenue outlook for the current quarter because search engines have driven less traffic to its websites in May and June.
"This acquisition will significantly accelerate the scale of our e-commerce business as we continue to expand into new revenue models," said CEO Richard Rosenblatt in a statement.
Demand Media assigns thousands of freelancers to produce stories about frequently searched topics and then sells ads alongside the content on its own websites, which include eHow.com and Livestrong.com. The company has been trying to improve the quality and variety of offerings after changes in Google Inc.'s search engine cut into traffic to Demand Media content. Demand bought the arts-and-crafts video website Creativebug earlier this year.
Designers and artists can sell their wares to the public on Society6.com. The company had about $15 million in revenue last year. Demand Media Inc.'s revenue came to $380.6 million in 2012.
The Santa Monica, Calif., company cut its revenue forecast for the current quarter, which runs through June, to $100 million to $101 million from a prior estimate of $105 million to $107 million. Analysts polled by FactSet predicted revenue of $106.2 million. Demand Media kept its profit outlook of 8 to 9 cents per share, which is below analysts' estimate of 10 cents per share.
The company is splitting itself into a content company, including its how-to articles, and a domain registry business. Society6 will be part of the content company after the split, which is expected this year.
Demand Media fell 14 cents to close at $8.17. The stock has dropped 12 percent this year.