The Real Problem With Demand Media is Google
The business of Demand Media is creating content in the form of articles and videos that search engines will crawl and feature prominently in the long tail of search results. Demand Media's achilles heel is that much of their Internet traffic and revenue rely on Google. Albeit, this is true for thousands of websites but none with the traffic and revenue of Demand Media and those other sites have not filed for an IPO either.
What should be scary for Demand Media is the notion that Google could turn off or drastically turn down the traffic spigot at any moment. Over the years all website owners held their collective breath upon every Google update of its algorithm hoping their site would be favored. We have all heard stories of sites that have disappeared from the top Google results for their keywords or have even been removed from the index entirely. This happened to tens of thousands of harmless Internet directories a couple of years ago.
Could content farms be next? And what Google does the other search engines tend to follow which makes Demand Media highly reliant on the good favor of Google. A very scary business model indeed!
Could Google possibly make changes to its algorithm that will slow down Demand Media's eHow.com traffic? Well, Google answered this question with an affirmative just last month. At Pubcon, the head of Google’s Webspam team Matt Cutts said that, 'there is a debate going on internally at Google over whether they should consider content farms web spam'. What bigger example of a content farm than Demand Media? Many would consider Demand Media the poster child of a content farm.
On the other hand, has Demand Media risen the bar of their content quality above what a typical content farm generates? If you are a Demand Media investor you had better hope so.