Demand Media 2Q beats analyst views

0
7

SANTA MONICA, Calif. (AP) — Demand Media Inc.’s second-quarter results beat analyst expectations Tuesday, and the online content provider eased concerns about its future growth by announcing the renewal of a key contract with Internet search leader Google Inc.

Shares of Demand Media, which operates websites including eHow.com and Livestrong.com, soared 17 percent in extended trading.

The company reported a net loss of $2.4 million, or 3 cents per share, in the April-June quarter. This compares with a loss of $1.9 million in the year-ago quarter, or 75 cents per share.

Excluding one-time items, Demand Media earned 6 cents per share, which is a penny more than what analysts polled by FactSet were expecting.

Search engines generate more than 45 percent of the traffic to Demand Media’s websites, and most of these referrals come from Google, which processes about two out of every three search requests in the U.S. Ads from Google’s vast marketing network also account for more than one-third of Demand Media’s revenue.

But the relationship appeared to be fraying earlier this year. In February, Google revised its formula for ranking search results in a way that threatened to undermine services such as Demand Media, which hires freelance writers specifically to produce articles based on frequently searched topics. The practice has caused some critics deride Demand Media as an online “content farm,” to the company’s dismay.

Although Google’s changes have diminished traffic to eHow, Demand Media is still managing ways to bring in more money. Revenue rose 32 percent to $79.5 million, during the April-June quarter, as more people visited the company’s websites and clicked on online ads.

After removing advertising commissions, Demand Media’s revenue for the second quarter totaled $76.6 million; analysts were expecting $73.9 million.

Demand Media gave itself a better opportunity to improve on those numbers by signing a new three-year advertising agreement with Google. The company’s current contract with Google was to expire next year.

During the latest quarter, Demand Media’s websites generated 2.6 billion page views, up 29 percent from the same time a year earlier.

Demand Media, which is based in Santa Monica, Calif., also feeds material to hundreds of other websites owned by its partners, which include Gannett Co.’s USA Today and the National Football League. Demand Media’s partner websites had 3.7 billion page views, which represents 17 percent growth from last year.

For the current quarter, Demand Media forecast $78.5 million to $82.5 million in revenue. Analysts are looking for $78 million.

And for the year as a whole, Demand Media expects revenue of between $321.5 million and $329.5 million.

Demand Media shares rose $1.53 to $10.51 in after-hours trading. The stock finished regular trading up 62 cents, or 7.4 percent, at $8.98. The company’s stock price had plunged by about 60 percent since Google began to de-emphasize content farms in its search rankings.