Demand Media Buys Society6 For $94 Million

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Demand Media is known for being an owner of the websites eHow, Livestrong, and Cracked.  The company announced on Monday that they have acquired Society6 for $94 million in cash and stock.  Society6 is an e-commerce company that has 300,000 users.  Society6 is known for selling products like iPhone cases and t-shirts.

Society6 lets artists upload images of a product.  After the purchase is complete, the order will be sent to an external manufacturer.  The shipper then sends the product to the buyer.  Society6 started four years ago in Los Angeles and reported around $15 million in revenue and $4 million in operating income last year.

Demand Media said that they revised their second quarter forecast due to a reduction in their search engine referral traffic.  Demand Media’s revenues are expected to hit around $100 million to $101 million compared to their previous range of $105 million to $107 million.

The way that Demand Media works is by having freelancers write articles and produce videos.  Demand Media knows how to get content on the top of Google for highly demanded searches.  Demand Media’s primary revenue source is advertising.  The company is highly dependent on Google, which makes their business a bit volatile.  Google has been consistently making changes to their search algorithm to weed out lower quality content.  Around 40% of Demand media’s total revenues came from contextual advertisements distributed through Google’s ads.

Demand Media has been working on diversifying their dependence on Google.  Demand Media bought Creativebug in March, which is a website used by artists to create how-to videos on showcasing skills like knitting and gardening.  These videos are accessed through a subscription model.  A subscription model has also been added to Livestrong as a way to ask for expert advice regarding health issues.

“We really started looking at these models late last year,” stated Demand Media CEO Richard Rosenblatt. “We stuck our toe in the water with Creativebug.”

Demand Media also owns a domain name registration business that sells top level generic Internet domain names.  This division will be spun off soon, according to Reuters.

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