* Adjusted EPS 7 cents vs Street view 5 cents
* Raises 2012 outlook
* Shares up 20 pct in extended trading
By Jennifer Saba
NEW YORK, May 8 Demand Media Inc
reported better-than-expected first-quarter revenue and raised
its 2012 outlook, suggesting it is finally moving past changes
that Google made to its search engine that hobbled the company
Demand shares, which closed on Tuesday at $7.93, were up 20
percent in extended trading.
Demand Media relies on freelance writers to provide articles
and videos designed to appear at the top of Internet searches
that in turn generate advertising revenue. It operates a clutch
of websites, including eHow, LiveStrong and Cracked.
Revenue, excluding traffic acquisition costs, rose 9 percent
to $82.9 million, the online content company said on Tuesday.
That was above analysts' average estimate of $79.6 million,
according to Thomson Reuters I/B/E/S.
The company raised its forecast for the year bolstered by
growing advertising revenue and traffic. Revenue, excluding
traffic acquisition costs, is expected to be in the range of
$347 million to $353 million versus a previous forecast of $337
million to $344 million.
The company is being closely watched as a new way to
inexpensively produce content, especially in light of the
challenges facing traditional media. Newspapers, for instance,
are struggling with plummeting advertising revenue, which puts a
strain on the cost structure that supports journalism.
Even so, Demand Media needed to shift its business model
when Google Inc made changes to the way its search
engine produced results in order to weed out content it
considered "low quality."
Those changes, known in technology circles as project
"panda," hammered Demand Media's results along with competitors
such as About, owned by the New York Times Co.
Demand responded by cleaning up its archives, putting in
measures to asses the quality of content and betting heavily on
video and social media.
For instance it struck up a partnership with YouTube by
launching channels with Demand's content.
The Santa Monica, California based company , which also
provides Internet domain name registration, went public in
January 2011 with much fanfare. The company's shares are down
more than 50 percent from its year high of $17.
A recent press report said that Demand had been approached
by a private equity firm to take the company private but that
the talks fell apart.
Demand Chief Executive Richard Rosenblatt would not comment
on the report when asked about it during a call with analysts.
"We want to grow this business as big as we can," he said.
"We can't comment on any type of offer but what I can tell
you, we want to drive shareholder value."
Adjusted for one-time items, earnings per share were 7
cents, beating analysts' expectations for 5 cents per share.
Demand Media reported a net loss of $1.8 million, or a loss
of 2 cents per share, compared with a loss of $5.6 million, or a
loss of 13 cents per share in the same period a year ago.