Peter Berger Explains Demand Media

Give Business Insider credit on their coverage of Demand Media. They’ve published insightful analyses, ranging from highly critical to extremely bullish. The best by far was Suite101 CEO Peter Berger’s Hater’s Don’t Understand Demand Media which provided useful insights into the model Demand and Suite101 employ.

[Disclosure: Like Berger, I work at a company (Answers.com) that uses some similar strategies to Demand]

Berger enumerates how life is different for companies using content models oriented around evergreen content that meets the demands of search users and search advertisers:

• Advice content has a very long shelf life. “… articles on Suite101 tend to display a pattern of continuous traffic growth. Our writers can typically expect increasing revenues from their articles on Suite101 for years.”
• Search audiences are very open to action-oriented messaging targeting their objectives. These content pages are highly valuable to niche, non-brand advertisers. For these sites brand advertising is a nice to have incremental lift, not the center of their monetization strategies.
• “Given current online users’ behavior and preferences, receiving the majority of search traffic from Google is a sign of normality … what content businesses must do to ensure their future relevance is invest in the content quality search engines want to present to their users …”
• “… when users are searching, the fewer clicks it takes to achieve their objectives the better (and more valuable) is their experience … ‘quality’ can not be captured by simplistic engagement metrics. Search-driven sites like About.com, StackOverflow, Answers.com, Suite101 and Demand Media will always show low page views per user and extremely high percentage of traffic coming from search engines. StackOverflow gets about 90% of their traffic from Google, which it says it views as their site’s home page. This is not an indicator of low quality, and people who attempt to denigrate Demand Media because of these stats are completely missing the point (or deliberately misleading their readers).

On a related note, Demand Media just re-filed for their IPO, clarifying their accounting practices of amortizing their content creation costs over 5 years. Henry Blodget advises Demand Media to drop the bogus accounting. He may be right that Demand should conform to the more accepted accounting practices and expense their content creation. But it’s not bogus accounting. As Peter Berger makes clear, unlike most companies’ archived content which is yesterday’s news, Demand’s archived content is the company’s primary asset, and it remains valuable for many years. Amortizing its creation costs may be unconventional, but it’s probably the most correct thing to do.

Previous articles on this subject:

• Demand Media: A Story in 5 Numbers
• Large-Scale Content-Creation Sites
• 2009 Top SEO Smackdowns: Arrington vs Demand Media
• Quality is Still King