Demand Media Rides Out Storm, Improves Earnings

Demand Media (NYSE: DMD) appears to be weathering executive churn and a Google (NSDQ: GOOG) downgrade. On Thursday, it posted earnings that reflect growth in both its domain name business and its sprawling group of web properties.

The company, which includes sites like eHow and LiveStrong, built its business by using thousands of freelancers to create websites tailored to attract drive-by search traffic. In doing so, Demand Media was tagged with the “content farm” label, a perception that was reinforced last year when Google downgraded it in its search listings.

A note in today’s financial statement suggests the company is attempting to weed out some of its lowest grade content:

Q4 2011 and full-year 2011 loss from operations and net loss includes $5.9 million of accelerated non-cash amortization expense associated with content intangible assets removed from service in conjunction with the Company’s previously announced plan to improve its content creation and distribution platform.

These write-downs led Demand Media to post an overall loss for the quarter, but its operating income was positive and beat analyst expectations. The company said it expects revenues to be between $78 million to $80 million in the current quarter.

Demand Media also makes money through companies that buy and sell domains. Today it reported that it is investing $5 million so-called generic top level domains — the new internet naming rules that may result in a raft of new domains ending in, say, “.flowers” or “.nike”

The company’s domain name initiatives are unlikely to endear it with brand owners who are already struggling to fight off third-parties who squat on their intellectual property.

For a complete account of Demand Media’s results, including its financials, see this report via the Domains.