Demand Media, which went public just over a year ago, promised its shareholders that revenue growth would accelerate by the second quarter after it reported a fourth-quarter net loss due to costs for improving its platforms.
We anticipate year-over-year comparisons to improve in the second half of 2012 and second quarter's year-over-year revenue growth to accelerate, compared with the first quarter, said Chief Financial Officer Charles Hilliard.
Demand Media is being closely watched as a test case for a way to inexpensively create content that surfaces high in search results.
The online company, based in Santa Monica, California, has 13,000 freelancers whose articles and videos appear on websites like its own eHow and LiveStrong and Gannett Co's USAToday.com.
Demand Media recently launched its first two major channels in its partnership with YouTube and Chief Executive Richard Rosenblatt said he had high hopes for video content to drive growth.
We need more video, it is what seems to be the most sought after by advertisers and consumers, he said.
Demand Media, which reported a fourth-quarter loss due to costs for improving its platform, said it aims to reach full year revenue excluding traffic acquisition costs (TAC) in a range of $337.0 million to $344.0 million versus $312.4 million in 2011 and adjusted earnings per share of $0.30 to $0.32 compared with $0.25 last year.
The company, which has been trading publicly since January 26, 2011, said its fourth-quarter net loss was $6.4 million compared with net income of $1 million in the year-ago quarter.
Adjusted earnings per share in the fourth quarter were $0.08, beating average analysts' expectations of $0.06
The company said revenue, excluding traffic acquisition costs (TAC), rose 16 percent to $81.3 million during the fourth quarter and that it expects revenue ex-TAC to be in the range of $78 million to $80 million in the current quarter.
During the fourth quarter of 2011, the number of registered domains grew by a net 482,000 compared with 404,000 in the fourth quarter of 2010, due to growth from new partners and organic growth from resellers, the company said.
Demand Media, which relies on freelance writers to provide articles and video designed to appear at the top of Internet searches, said it expects first-quarter adjusted earnings per share of 5 cents to 6 cents.
It competes with Yahoo's Associated Content, the New York Times Co's About.com and AOL's Seed.
Demand Media stock was down 0.7 percent in after-hours trading after it closed down 4.96 percent at $5.94 on Thursday.
Demand Media's initial public offering was priced at $17.
(Reporting By Nicola Leske; Editing by Bernard Orr)