It was a bad week on the farm.
Shares of Demand Media
As a content-farm operator, Demand Media relies on high rankings for timely keywords through the leading search engines. The quality of the content that Demand harvests has come into question since the company went public at $17 a share three months ago, but now its flagship eHow.com how-to website may be finally paying the price.
Demand Media is fighting back this morning, conceding a slight setback in traffic while reiterating the financial guidance it provided back in February.
The dogged dot-com admits that the latest update at Google -- its biggest source for organic traffic -- has resulted in "moderately lower" page view growth. Demand Media sees page views across all of its properties for the current quarter as "comparable to, or greater than" where it was during last year's second quarter.
That may come as a relief to the worrywarts, especially since Google reported last week that its advertisers were paying 8% more per lead than they were a year earlier. However, analysts were targeting $73.4 million in revenue for the current quarter after Demand Media checked in with $60.4 million on the top line during last year's second quarter. Unless Demand Media's domain registrar business has a monster showing, Wall Street's bound to take that target lower in the coming weeks. Demand Media's content business also carries its thickest margins, so bottom line revisions are also likely.
Demand Media isn't evil. Content farms including Demand Media, Yahoo!'s
No one's going to shed a tear for the opportunistic sites slipping in Google's rankings. Willie Nelson isn't going to reunite musicians for a Content Farm Aid benefit concert. However, it would be wrong to dismiss the genre completely after last week's update. Content farms specialize in search engine optimization. If anyone can get back into the hunt, why not Demand Media?
Are content farms evil? Tell us all about it in the comment box below.
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Longtime Fool contributor Rick Munarriz wonders if content farms will be whittled down to mere petting zoos. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.