May 5, 2011 / 9:07 PM / 8 years ago

UPDATE 2-Demand Media makes editorial changes, ups forecast

* Demand shuts down eHow user-generated content program

* Referrals, page views fell after Google made changes

* Q1 revenue ex-TAC up 50 pct to $76.3 million

* Q1 EPS net loss of $0.13 vs. net loss of $0.94 yr-ago

* Shares rise 10 pct after hours (Adds executive comments, background, byline)

By Jennifer Saba

NEW YORK, May 5 (Reuters) - Demand Media DMD.N is shutting down a program that lets anyone publish to its eHow website, and plans to raise the quality of its how-to articles and videos by commissioning higher quality stories.

The company commissions short, lightly reported articles and videos for eHow, often for low pay. It uses software algorithms to choose topics that it thinks people will search for in large numbers, thereby pushing those articles to the top of Web search results on Google (GOOG.O) and other search engines. That in turn brings in more advertising revenue.

In February, Google made changes to its search engine algorithms to reduce the amount of lower-quality content surfacing high in results. [ID:nL3E7FI1KN]

Because of those adjustments, search engine referrals for eHow fell 20 percent, said Demand Media Chief Executive Richard Rosenblatt. Total page views declined 12 percent.

“Let me be clear, this was a real impact to our business and we take it very seriously,” Rosenblatt said.


The company said it will commission longer stories of about 850 words such as an interview on poet Maya Angelou’s cooking philosophy and an examination of the heirloom produce craze. Writers would be paid in the range of $80 to $350.

Demand made the announcement on Thursday as it reported first-quarter results and raised its 2011 revenue forecast, excluding traffic acquisition costs, to $305 million to $315 million.

Analysts on average forecast $307.74 million, according to Thomson Reuters I/B/E/S.

Shares of Demand Media rose 10 percent after hours to $18 from a $16.31 regular-session close.

Rosenblatt described the editorial changes as an “evolution” rather than a departure from the company’s original strategy, on a conference call with analysts.

“Some people are looking for very quick answers ... while other people want more detailed longer answers,” he said. “We can afford to create that content.”

Demand is winding down a program that lets anyone publish articles on its largest site, eHow, in an effort to “improve consumer experience and ensure the highest quality content on the site,” after receiving visitor complaints, the company said in a statement.

The process involves combing through its archives, pulling some content that appears on eHow, giving the company full editorial control over its content.

First-quarter revenue excluding traffic acquisition costs rose 50 percent to $76.3 million. The company reported a net loss of $5.6 million, or 13 cents a share, compared with a loss of $4.1 million, or 94 cents a share, a year earlier. (Reporting by Jennifer Saba. Editing by Robert MacMillan and Steve Orlofsky)

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