Posted February 25, 2011 10:34 am by with 7 comments

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If you are Demand Media yesterday’s Google events were probably a little disconcerting to say the least. The company is just coming out of the quiet period after raising some serious coin in a January IPO. All along they have warned about how dependent they are on results like Google search to drive traffic and that their model could suffer if there were changes in the system that worked to the detriment of Demand’s product.

Now that they are a public company they need to get out in front of these matters more and they tried to do just that yesterday with this post on their blog from Executive Vice President of Media & Operations, Larry Fitzgibbon. (As of this writing the stock is down 3.36% 10:13 EST) Here is the post in its entirety.

How our content reaches the consumer – whether it’s through direct visits, social media referrals, apps or search – has always been important to and monitored closely by us. We also recognize that major search engines like Google have and will continue to make frequent changes. We have built our business by focusing on creating the useful and original content that meets the specific needs of today’s consumer. So naturally we applaud changes search engines make to improve the consumer experience – it’s both the right thing to do and our focus as well.

Today, Google announced an algorithm change to nearly 12% of their U.S. query results. As might be expected, a content library as diverse as ours saw some content go up and some go down in Google search results. This is consistent with what Google discussed on their blog post. It’s impossible to speculate how these or any changes made by Google impact any online business in the long term – but at this point in time, we haven’t seen a material net impact on our Content & Media business.

Coming out of the IPO quiet period this week, we knew the topic of Google’s search engine changes was top of mind for many people — so we discussed it on the earnings call, in a couple of follow up interviews and are now issuing this statement. However, we generally don’t comment or speculate on changes by major search engines. They make changes nearly daily in a quest to give consumers the best possible experience, as do we.

Finally, in our Q4 earnings call on Tuesday we talked at length about the nature of our content and the consumer experiences we are delivering. Beyond our success helping consumers discovering our content via search, we also shared metrics around direct visits, repeat visits and social visits. We believe these metrics are leading indicators that our properties are developing into recognizable consumer brands that are delivering real value to an increasingly loyal community.

We believe these kinds of indicators are a result of our firm commitment to the interests of consumers, and that is where we continue to focus our efforts.

Well, what else are you going to say if you are Demand Media? What they might actually be thinking is “Thank our lucky stars that we got this IPO out the door before this happened!”

Demand Media may have gotten away with something by getting in the IPO door just before it was slammed shut by a Google algorithm change. How or if it impacts them in the long run remains to be seen but this is further evidence of just how fragile the who whole Internet ecosystem is because of the inherent need to depend on third parties for large parts of a company’s success. It’s risky business for sure.

So Demand Media is playing it cool for now but you can see how they are trying to get their train off the Google Express train and move over t the local tracks with stops at traffic from direct visits, social mentions and repeat visitors. They may be hurting yet but they are at least a little bit uncomfortable with the way things are now.

Hey, if I were them I would be too.

  • Their stock is up substantially since the IPO. Your argument only becomes valid when the stock hits $17 or so, which is where they went public.

    • Not presenting an argument. Just stating some facts and circumstances. What about investors coming on board post IPO.? Won’t they be interested if the stock moves?

  • I am not agree with the post….

  • When their traffic actually plummets then they will have something to worry about.

    • @Jaan – Do you think their traffic will plummet?

      • Who knows really. I have seen dozens of instances spam on major brands and nothing done. it seems that if it does go down we will know soon as the new “content farmers” algo was announced today.

  • I know that i will be digging into their 10Q statements this year. If Google’s algorithm change hits them, they will try and hide it. But the cons of being a public company is just that, your data is public. The only problem is waiting for their quarterly SEC documents to see what has happened for the previous 3 months. You might not get a clear picture for up to 6 months or a year, however. ‘Ad Revenue’ is still easy to inflate through creative partnerships with other companies, but if you know how to read between the lines of a 10Q statement, there are golden pieces of info in there.