"We are thinking through the implications of, 'How do you editorially program the planet?' " says Byron Reese.
It's March 2010, and Reese, the chief innovation officer of Demand Media (DMD), is accepting a "game changer" award for innovation at the We Media conference in Miami. Several dozen people listen as he invokes Demand's plan for cranking out Web pages and videos to quench every last bit of human curiosity wherever it springs up. The plan's code name: Little Brother, a nod to George Orwell.
Reese does not share many details about how Little Brother will work. Instead, he shows an image from The Terminator. "Perhaps at this point you're thinking, 'I know where all this is going,' " says Reese. " 'I've seen this movie before. The machines are going to start making the decisions. We're going to be ignorant. They're going to take over.' " He assures his audience that Demand Media will not annihilate humanity.
Over the past decade, Reese has quietly pioneered a new breed of media company, colloquially called a "content mill." Where traditional media companies rely on creative professionals to generate ideas aimed at loyal repeat readers, content mills are far more transient. They rely on crowd-sourced stories and search engine optimization, the art of gaming online search results to ensure one appears at the top, to rope in drive-by users looking for a quick hit of information—how to hang a door, say, or make sourdough starter. The pedigree of the source providing it is not important.
Large media companies, including Yahoo! (YHOO) and AOL (AOL), are introducing variations on the content mill model, hoping to draw more traffic, and in turn more advertising revenue, while lowering the costs of content creation. Demand Media is the fastest-spinning mill of all, currently producing more than 5,000 articles and videos for the Internet every day on topics often selected by computers. A decentralized horde of 13,000 freelance writers, editors, and producers earn minimal fees (around $15 for writing an article of a few hundred words) to keep the production line humming. The resulting stories are distributed across Demand-owned websites such as eHow.com, Answerbag.com, or Livestrong.com and are hyper-engineered by specialists to appear at the top of search engine results for a vast number of queries. The stories, which are not tied to news events and are thus designed to have long shelf lives, tend to be coherent but uninspired. The potential for monetization is said to be vast.
"It's a great business model," says Ken Doctor, an affiliate analyst for Outsell. "They've been pioneers in defining a new content creation model based on harnessing so much low-cost content and matching it better than anyone with targeted advertising."
"They really understand consumer behavior on the Web and how to build businesses on it," adds Sheryl Sandberg, Facebook's chief operating officer.
"I feel privileged to be an investor," writes Aviv Nevo, head of venture capital firm NV Investments and one of the largest holders of Time Warner (TWX) stock, in an e-mail. "I am confident that the company will continue to be the premier leader in the creation of rich, focused and tailored content."
On Jan. 25, Demand Media sold 8.9 million shares at $17 each in an initial public offering. The following day, the price rose 35 percent to $22.61, which would give the company a market capitalization of $1.9 billion, greater than New York Times Co.'s (NYT) value of $1.5 billion.
Post a comment about this story in Reader Discussion…
RSS Feed: Most Read Stories
RSS Feed: Most E-mailed Stories
RSS Feed: Most Discussed Stories
Buy a link now!
About Advertising EDGE Programs Reprints Terms of Use Disclaimer Privacy Notice Ethics Code Contact Us Site Map
©2011 Bloomberg L.P. All Rights Reserved.
Read Full Article »