Demand Media’s Q2 earnings beat Wall St.’s expectations last week, as the content aggregator (don’t call them a “content farm,” okay?) and owner of eHow, Livestrong and Cracked posted its first, albeit slight, profit since issuing its IPO over a year ago. The company has attributed much of its growth to social media, something that traditional media companies still regard as competition for consumers and advertisers. We spoke with Joanne Bradford, DM’s chief revenue officer, and her colleague Peter Luttrell, SVP Ad Solutions & Brand Management. Luttrell was CEO for IndieClick Media Group, which DM acquired last year for about $14 million.
AdExchanger: What led to the improvements in DM’s earnings in Q2? What have you done differently?
Joanne Bradford: We’ve worked really hard on several fronts this past year. The first is on quality content and the experience for the consumer, and in turn, creating a more premium environment for advertisers. The mission of Demand Media is pretty simple: help understand what consumers are doing in real life. We worked on creating a space where people could find inspiration for how to live their lives better and accomplish things they would like to do and share information about things that reflect their personality and the arc of an average day.
Consumer engagement has improved dramatically, including on content that we produce for our sites like eHow, Livestrong and Cracked, as well outside sites that we work with, like USA Today and L’Oreal. We’ve also changed how we package the content. For example, we created eHow Tech and a video series with a well-known mom blogger, someone we know that people in the space can relate to. Similarly, we created a video series with a guy who wants the “ultimate man cave” with every tech gadget available. We’ve always had the social media layer. But having the person attached with a certain expertise and a growing video library has helped expand the advertising effort.
Peter Lutrell: One of the things that we brought with us from Indieclick was our ad platform and our ad formats. We came to Demand with nine ad formats and we wanted to bring those units to eHow, Livestrong and Cracked. There’s been a lot of activity at the Interactive Advertising Bureau, in terms of the promotion of the Rising Stars ad units and we wanted to support all of the formats across display, including mobile and video.
In the last quarter, we launched 13 new ad formats for Demand sellers and the one we’re really getting great traction with is our social initiative. We look at social as a feature we can place within an ad. We’ve got three different types of social integrations such as our “social feeds,” which allows brands to gather all the Facebook, Twitter and Pinterest feeds that they may have out in the marketplace and republish them into the rich media ad unit.
We just rolled out a trial and we’re starting to get the data back. Fandango, for example, has placed all the top movies into the ad, which encourages people to place their zip codes in the unit and sends to Fandango’s site to purchase tickets. In all those ads, we saw clickthrough and engagement rates up 10x the usual number. We measure engagement by someone taking an action, interacting with the ad in some way. But we didn’t just want to support those Rising Stars formats, we also wanted to add our own innovation on top of that as well.
In addition to the benefits of connecting social media with advertising, how has the rise of audience targeting and real-time bidding helped Demand Media’s performance?
We participate in channels related to audience buying and RTB. We have such a powerful view into consumers’ attention at a given moment, audience buying is something of a sweet spot. For example, we have a lot of appeal to moms. Most sites catering to moms are standard blogs, where the goal is to share a particular story as opposed to a “solution.” Our research tells us that as much as moms want to share, they want direct information on how to get the baby to sleep, how to avoid sunburns. That’s an audience we can sell very easily.
We also see a lot of seasonality to our business, so right now, we’re focusing on selling packages related to “back-to-school” and Halloween. The point is, when people come to our sites, they’re in a “get something done right now” mode, which is perfect for RTB and audience buying. While we perform well in audience buying environments, we also look to encourage advertisers to have a more direct relationship with us. That’s still where the value is.
Looking at the competitive landscape, web properties like About.com have been hurt by the changes in Google’s search algorithm. Since that site is now in the process of being sold by its parent, the NYTCo, how has Demand avoided the pitfalls About has faced?
JB: We believe that search algorithms and distribution on Facebook, Google, mobile devices will change every single day. And we welcome that change, because most of the time, we view it as an opportunity for us. We have a large library of content and a creative group of producers who are excited to get their content out there. We were really pleased that comScore’s traffic ranking this past month had us going from 17th place to 16th, passing the New York Times’ site. It’s a recognition of our awareness of what’s going on in all the different digital ecosystems and knowing how to create content, how to pay for it and how to distribute it to the right audience.
We know the changes don’t go in our favor, we know we can figure out what we need to do in order to meet the consumer across Facebook, being discovered on search, placing our content on YouTube and Twitter.
