Demand Media Expands Beyond the Content Farm With CoverItLive

Demand Media (s dmd) announced Thursday that it has agreed to acquire CoverItLive, a live-blogging and online discussion service Demand has had a stake in since 2009, and will be folding the company into its Pluck unit. The price of the acquisition wasn’t disclosed. Although Demand is known primarily as a “content farm” that pays freelancers to produce articles based on keyword-search algorithms, the company — which recently went public at a valuation of $1.5 billion — has other content-related businesses that don’t involve custom manufacturing, including Pluck. While Demand says it hasn’t yet been affected by Google’s crackdown on content farms, the acquisition could be a sign that the company wants to expand into other areas of user-generated content that are less controversial.

CoverItLive, which is based in Toronto, was founded in 2007 by Keith McSpurren, and was originally known as Altcaster. The hosted service was designed to allow bloggers and eventually media companies to quickly and easily create live blogs for events, and to host live discussions (Disclosure: I worked closely with CoverItLive in my previous job, and consider McSpurren a friend). The service has been used by everyone from ESPN to the BBC to cover live events, and according to Demand it gets 60 million visitors a month and over 60 percent of its traffic comes from outside the U.S.

“Our growth curve has just been so steep, and our choices were to go out and raise money or be acquired,” McSpurren said in an email message, adding that he was happy to be bought by Demand Media despite some of the criticisms of that company’s business model. “Having done my first startup with VCs who didn’t particularly know what they were doing, I was really happy to take an investment and then get acquired by people who truly had an interest in the long term of my idea,” the CoverItLive CEO said. The company raised $1 million in seed funding in 2009 from Flagstone Capital and private investor Paul Kedrosky.

The CoverItLive software allows bloggers and other publishers to embed a window in their pages using JavaScript and then post content into the live-blog or discussion in a variety of ways — either directly through the widget, or via a mobile client, or through Twitter. Bloggers hosting discussions can allow others into the chat session via a Twitter or Facebook login, and can also automatically pull in tweets that mention a specific keyword, or pull in Twitter streams from specific users. Photos, audio and video clips can also be embedded in the discussion or live-blog stream as well. CoverItLive competes with another similar service called ScribbleLive, which is also based in Toronto.

Demand Media made a strategic investment in CoverItLive in 2009 through Pluck, which Demand acquired in 2008 for a reported $70 million. Pluck is a hosted service that handles comments, photos and other user-generated content for a number of newspaper chains and other publishers including USA Today (s gci). Although the two businesses are not large in comparison to the rest of Demand’s portfolio — which includes the eHow “content farm” operation, sites like Livestrong and the eNom domain-registration business — the combination of Pluck and CoverItLive gives Demand a different (and less controversial) kind of content platform it can offer publishers.

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