Demand Media’s IPO

January 30th, 2011 by Chris

What is a content site worth?

Previous related posts on this topic here and here.

Demand Media recently went public, they’re now trading at an almost 2 billion marketcap (more than the New York Times, which owns quite a few web properties too). Meaning, the market says they are worth about 20x revenue. It has to be revenue because it is an unprofitable company.

People often try to buy sites for 2x yearly profit, and the market says Demand’s stable of content sites (And domain registrar business) is worth 20x revenue. Even though Google has recently broadcast that they don’t like content farms.

Some people are speculating that Demand Media is going to use all the cash they just generated in the IPO to make acquisitions. If they bid 20x revenue, they can certainly buy me out, and my business is profitable.

This is good for the industry as a whole in anycase. It shows content websites as a real business and may spur other consolidation and acquisitions. You might get a phone call, an email, or a letter one day from someone saying “Hey, I want to buy your website.” and this time they might not lowball an offer.

One Response to “Demand Media’s IPO”

  1. Richard  Says:

    I read last week that Google started cracking down on these giant content providers like Ehow, About and Demand Media. What do you think Google changed in their algorithm and do you think this effects us small individual web publishers?

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