This may not be much of a surprise at first.
Demand Media's no stranger to sniffing out where the action is. The dot-com media mogul routinely taps its growing army of freelancers for timely content that it can monetize effectively and position well for maximum exposure. It reaches an audience of more than 100 million people through its arsenal of websites.
CoveritLive also has its pulse on what's happening. It provides a multimedia platform for companies and bloggers to cover live events, attracting more than 60 million people a month.
Both companies are eyeball magnets, but they differ greatly in their content acquisition and monetization.
Demand Media pays its freelancers just enough to keep them happy, but without sacrificing an article's profitability. CoveritLive doesn't have to pay its content creators at all. Live bloggers are happy to have a free platform where they can speak their mind with interactive tools for free. Event attendees are also just as happy to be there.
This disparity doesn't mean that CoveritLive is more profitable than Demand Media. In fact, it's probably not. Terms of the acquisition or CoveritLive's financials aren't being disclosed. However, it would be a shock if CoveritLive was firmly in the black.
Unlike Demand Media's ability to circulate ad-slapped content in high-traffic areas, CoveritLive is largely a free site with limited advertising.
Small bloggers -- those with monthly readerships of 5,000 or fewer -- can host ad-free events for free. Larger bloggers can still take advantage of CoveritLive without cracking open the checkbook. They simply have to put up with a limited number of ads, unless they pay a small premium for an ad-free platform. The largest of bloggers can actually take advantage of revenue-sharing on the advertising shown during their free-hosted events.
I'm not seeing a lot of money being made there, and that's before considering the challenge to sell ads against what is essentially a glorified chat room environment.
At least Demand Media knows exactly what it's getting itself into. It's been an investor in CoveritLive for two years. It's also the one responsible for the ads. Whether it sees the potential to improve the monetization under total ownership or it's just doing this to have access to CoveritLive's thick Rolodex and even thicker audience list, Demand Media knows CoveritLive better than anyone else.
However, this also makes it surprising that Blogger.com parent Google
Demand Media's been busy since going public at $17 a share less than two months ago. It posted a rare profit during its first quarter as a public company last week. Without knowing the terms of the deal -- or even if it will be accretive or dilutive -- it's hard to pass judgment on the deal financially. Strategically, though, it makes perfect sense. My only lingering bone to pick here is that Demand Media didn't utilize CoveritLive to host a conference call to discuss the deal.
Which private company would you like to see go public this year? Tell us all about it in the comment box below.
Google is a Motley Fool Inside Value pick. Google is a Motley Fool Rule Breakers selection. Yahoo! is a Motley Fool Global Gains recommendation. The Fool owns shares of Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
Longtime Fool contributor Rick Munarriz is glad to see the IPO spigot flowing again. 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.