Jonathan Yarmis is Doctor Disruptive

Demand Media went public today in one of the largest and most successful Internet IPOs in a long time.  That has to be good news, right?  We all want Internet companies to prosper.  We all want the financial markets to open up so we have more exit options.  Well, without getting into the financials of the whole deal (if you want a good analysis, read here), let me just state that I find the whole Demand model to be bizarre and unfortunate.

First of all, if you’re reading this blog, you’re probably not very familiar with Demand Media.  That’s because you’re generally smart enough to search and browse the Internet.  If you’re not so smart, well, Demand is looking for you.  Their business is really quite simple.  They accumulate a lot of domain names.  They populate those domains with low quality content created by a legion of freelance writers.  They then search engine optimize the heck out of that content so that it appears high on Google page rankings.

Here’s where it gets really insidious.  They then rely on the P. T. Barnum effect to drive revenue.  You know…”there’s a sucker born every minute”?  It’s actually important to Demand that the content be of low quality.  They don’t want you spending a lot of time with the content.  In fact, they’d be very happy if you never read the content.  What they want you to do is find nothing of interest on the page but find a link in an ad on the page that takes you where you actually wanted to go in the first place or really, just someplace else.  When that happens, kaching.  They get paid by Google for that ad click.  That’s their source of revenue.  Period.  Oh yes, they’re also a domain registrar but they do that not because it’s such an interesting business but because it gives them inside access to expiring domain names that they might like to own.  It’s also important for them to have a really good source of information on what people are searching for so that they can best satisfy that need with their content and domain names.

Google also benefits from this dirty little arrangement because Demand generates so many ad clicks that might otherwise have gone to organic search results.  Here’s though where it gets dangerous for Demand.  Let me hasten to note that the problem I’m about to talk about is not of Demand’s making.  They’re just a shrewd beneficiary.  Have you noticed that Google search results are getting worse and worse?  Most of you probably don’t even notice but right on the Google search screen, there’s a button that says “I’m Feeling Lucky.”  If you enter a search term and click that button, it takes you right to the first result of the Google search.  No search results page, just the first piece of content.  There was a time when that actually was a good choice.  Google’s search algorithm was so good, or so they represented, that you could just click that button and save yourself an extra click.  When was the last time you did that?  And what did you get?  Well, if you did it, you probably got a Wikipedia page (and if you wanted Wikipedia, wouldn’t you have gone there in the first place?).  Increasingly, though, there s a chance that you got not the information page you wanted but rather someone who did a great job of search engine optimizing (SEO).  There’s a whole industry around SEO.  I do Google searches these days that return such bad results that it’s not until the second page or later that I actually get to some content related to what I was searching for and not some Google-optimized retail “opportunity.”

Somewhere soon, Google is going to have jiggle with its indexing algorithm to push these “click trolls” further down in the results page so that the high quality content that you’re searching for actually appears back on that first page.  Whether they explicitly punish Demand Media, I have no idea.  Probably not.  But the net result should be that people who are trying to trick the search engine into presenting you their page when it really isn’t what you’re searching for should end up lower down in the listings.  For those of us trying to use Google as a vehicle to find information, this is great news.  For Demand Media, not so good.

Demand has built a business that today is valued at over $1 billion by gaming the system.  Good for them.  Not so good for us.

Filed under: Ad-Supported Business Models, Uncategorized | Tagged: Demand Media, Google, Internet IPO, Search Engine Optimization, SEO |