Los Angeles Business Journal

Demand Media's Quarter Pleases Investors

By Deborah Crowe Friday, February 17, 2012

Demand Media Inc.'s stock jumped 31 percent on Friday after the online content publisher reported a significantly smaller fourth-quarter loss, suggesting that the company is starting to recover from the decline in traffic that resulted from changes to Google's Internet search formula.

The Santa Monica specialty Internet site operator reported a net loss of $6.4 million (-8 cents a share) compared with a loss of $7.6 million (-54 cents) in the same period a year earlier. Revenue rose 15 percent to $84.4 million.

Excluding one-time items, the company had earnings of 8 cents a share. Analysts surveyed by FactSet on average were expecting adjusted earnings of 7 cents a share on revenue of $82.5 million.

Demand Media and its specialty websites have struggled since Google changed its coding. The change pushed some of Demand’s content lower in its search results. That affected advertising revenue, which is based on the number of times an ad is seen. Demand then took measures to improve its content.

For the full year, the company expects adjusted income of 30 cents to 32 cents a share on $351 million to $358 million in revenue. Analysts are expecting 31 cents a share earnings on revenue of $360 million.

“We enter 2012 positioned to expand our existing business lines while investing in areas where we see significant future growth,” Chief Executive Richard Rosenblatt said in a statement. “We plan to leverage our data, studio and extensive distribution in new ways to solidify our leadership in the rapidly growing digital content marketplace.”

Shares on Friday closed up $1.82, or 30 percent, to $7.76 on the Nasdaq.