Demand Media Shares Take Hit With Google Algorithm Change

 @ibtimes
on February 25 2011 1:31 PM
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The newly-minted shares of Demand Media, which turned heads with their early success, are turning rusty in a hurry thanks to Google's algorithm changes.

Shares of Demand Media's stock were down approximately six percent from $22.95 at the end of day trading yesterday to $21.29 by noon.

It's no secret why their shares are taking a hit; Google announced last night a change in its algorithmic rankings, which has a profound impact on low quality sites. Many critics of Demand Media consider it to be a primary target of these changes.

This update is designed to reduce rankings for low-quality sites-sites which are low-value add for users, copy content from other websites or sites that are just not very useful. At the same time, it will provide better rankings for high-quality sites-sites with original content and information such as research, in-depth reports, thoughtful analysis and so on, said Amit Singhal, Google fellow, in a blog post.

While Google did not specifically mention content farms, it was not hard to deduce that those were the sites the company meant. In the past, the company has mentioned content farms, and said they feature shallow or low-quality content. A new extension on Google Chrome allows people to block these types of sites from their web search results.

Google said in the blog post that the new algorithm changes impact 84 percent of the top blocked sites on the Chrome extension.

While there are others in the category such as Suite101 and Associated Content, Demand Media is the industry leader. Its IPO made news, not only for its impressive performance, but for the fact it made Demand more valuable than a traditional media organization, The New York Times Company. Demand Media has denied it is a content farm. The company said the new changes would have little impact on them and haven't had any thus far.

As might be expected, a content library as diverse as ours saw some content go up and some go down in Google search results. This is consistent with what Google discussed on their blog post. It's impossible to speculate how these or any changes made by Google impact any online business in the long term - but at this point in time, we haven't seen a material net impact on our Content & Media business, executive vice president of media and operations Larry Fitzgibbons said in a blog post.

In their first earnings call, Demand Media chief executive Richard Rosenblatt said Google's efforts to cut down on low quality content would not have an impact on his company. He said it would actually help them.

A spokesperson with Google did not specify whether or not the company was targeting sites like Demand Media with the changes. He said the company has heard from its users that they want to see fewer low quality sites in our results.

Demand Media did not respond to a request for comment.

To contact the reporter responsible for this story call (646) 461 6920 or email g.perna @ ibtimes.com

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