Los Angeles Business Journal

Demand Reports Losses, Declining Revenue

By Natalie Jarvey Thursday, November 7, 2013

In its first earnings report since the departure of Chief Executive Richard Rosenblatt, Demand Media said fewer ad dollars spent on its media properties led to declining revenue and a net loss in the third quarter.

The Santa Monica media company announced Thursday a third-quarter net loss of $10.4 million (-12 cents per share), compared with a net income of $3.2 million (4 cents) in the same period last year. Revenue fell 2 percent to $96.3 million for the quarter.

"This quarter, our media business was negatively impacted by declines in search referral traffic and advertising demand," interim Chief Executive Shawn Colo said in a statement. "Despite these challenges, I am excited about the long-term prospects for both our media and domain name services businesses."

Demand Media is a company in flux. Rosenblatt, who co-founded the company will Colo, announced in October that he would resign by the end of the month. Colo has stepped in as interim president and chief as the board conducts a CEO search.

Meanwhile, Demand plans to spin off its Internet domain name business into a separate public company, Rightside Group Ltd., as soon as early next year. With an 11 percent increase in revenue for the quarter, that business is the one bright spot in the company's otherwise dismal earnings report.

The company's overall performance was hurt by a 7 percent decline in revenue in its content and media business – which includes Web properties eHow.com and Livestrong.com.

Page views at Demand's owned-and-operated Web sites increased 21 percent due to increased mobile traffic, which offset continued declines in traffic from search engines such as Google. But RPM – or revenue per thousand views – declined 13 percent due to lower display and mobile advertising rates. Page views for Demand's full network of sites declined 37 percent and RPM fell 10 percent.

The company reported a full year outlook of adjusted earnings-per-share of between 26 cents and 28 cents and revenue between $396 million and $399 million. The guidance assumes that declines in search engine referrals will continue at some of Demand’s websites.

Demand shares closed up 15 cents on Thursday, nearly 3 percent, to $5.37 on the New York Stock Exchange prior to the earnings report.