Demand Media's surprising Wall Street splash

With a business model that a big chunk of the tech industry regards as shaky, some people didn't think Demand should be going public in the first place. Its IPO, however, performed better than expected.

A massive banner with the logo of digital content company Demand Media was hanging on the front of the New York Stock Exchange this week to commemorate the Santa Monica, Calif.-based company's initial public offering on Tuesday.

It was the first venture-backed IPO of 2011 , and it performed better than expected: Analysts projected an initial price of $14 to $16 per share, which Demand ultimately beat at $17 per share. When markets closed yesterday--Demand's first full day of trading--shares were at $22.65, a jump of one-third.

There had been many skeptics about Demand's success on the public market--and, indeed, it still has much to prove. The company's business model relies on the production of heavy levels of written and video content for its sites like eHow and Livestrong on behalf of freelancers, with crafty search-engine know-how pumping up ad impressions. Critics call it a "content farm," blaming Demand and companies like it for making search engine results less relevant and helpful than they should be. Google, meanwhile, made a vague announcement several days before Demand's IPO that it would be addressing the problem of low-quality content in search results.

Demand executives deny that Google's crackdown will affect the company (or that it is intended to affect them in the first place).

About the author

Caroline McCarthy, a CNET News staff writer, is a downtown Manhattanite happily addicted to social-media tools and restaurant blogs. Her pre-CNET resume includes interning at an IT security firm and brewing cappuccinos.

 

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