Demand Media says traffic hurt on

BANGALORE Mon Apr 18, 2011 12:35pm EDT

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BANGALORE (Reuters) - Demand Media Inc said Google Inc's new search algorithm hurt page views on some of its websites moderately, sending its shares down as much as 13 percent on Monday.

However, the company said some third-party estimates on the impact have "significantly overstated" the negative impact of those changes on traffic to

"Changes have negatively impacted search driven traffic to some of our websites, including, resulting in moderately lower year-to-date page view growth," the company said in a statement.

For the first nine months of the past year, 28 percent of Demand Media's revenue came from Google.

Demand Media relies on search engine optimization to boost traffic to its websites based on key words used by search engines to produce results.

Google frequently makes changes to its algorithm based on user feedback and browsing behavior. In February, the company said its latest change noticeably impacts 11.8 percent of the search queries.

"Many of the changes we make are so subtle that very few people notice them. But in the last day or so we launched a pretty big algorithmic improvement to our ranking," Google had said in a blog post.

Demand Media, which has 13,000 freelancers whose articles and videos appear on websites like its own eHow and LiveStrong and Gannett Co's, however, said the lower traffic will not affect its previous outlook for 2011.

Stifel Nicolaus analyst Jordan Rohan attributed the vulnerability of Demand Media's traffic to Google "unnerving" for the investors as a reason for the sell-off.

Demand Media, which competes with Yahoo's Associated Content, the New York Times Co's and AOL's Seed, went public earlier this year and has been pegged as icebreaker for Internet-related deals this year.

The Santa Monica, California-based company had projected 2011 revenue of $310-$325 million in February, when it reported fourth-quarter results. Analysts, on average, were expecting revenue of $311.5 million, according to Thomson Reuters I/B/E/S.

Shares of the company were down 9 percent at $17.60 in late morning trade on the New York Stock Exchange. They touched their lowest of $16.91 earlier in the session.

The Dow Jones Industrial Average was down 1.62 percent in late morning trade on Monday.

(Reporting by Himank Sharma; Editing by Prem Udayabhanu and Gopakumar Warrier)

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Comments (1)
JennPrentice wrote:
Anecdotally, I performed a few home repair searches on Google this weekend and eHow was ranked in the top three results each time, so I’m not sure how broad the effects are on Demand Media’s properties. That said, Google has entered some questionable territory with their latest algorithm update.

A few months ago, Google introduced a Site Blocker extension for its Chrome browser that allowed users to block sites from appearing in results. Now, Google is extrapolating that user data and applying it general search results. So it follows logically that large sites like eHow would be affected.

Improving user experience by providing individuals with the tools they need to customize their search results is good customer service; drawing conclusions from those individual preferences and applying them to everyone’s search results is a disaster waiting to happen.

If you’re interested, you can read the full analysis in my recent blog post, Google’s Farmer Update II: Plowing The Wrong Field.

Apr 18, 2011 12:26pm EDT  --  Report as abuse
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