Demand Studios’ IPO Reveals More Reasons Writers Should be Wary

Carol Tice

Demand Studios IPO means freelance writers should be wary. Makealivingwriting.comIn case you haven’t yet heard, content farm Demand Studios is planning a $125 million initial public offering. This was not unexpected. We’ve already got the drill down — content mills pay freelance writers peanuts, and then go public or get acquired for $100 million-plus.

But there’s a difference here from Associated Content’s recent acquisition by Yahoo! An IPO requires a hefty public filing, in which the company has to disclose tons of facts about their business. (Since Yahoo is so big and AC so relatively small, Yahoo didn’t have to disclose much about the acquisition to its shareholders.) The IPO filing, known as an S-1, is long. But here in brief are a few important things the filing reveals about Demand Studios’ business that writers should know:

DS is losing money. That’s right, they pay you only $15 for an article, and they still haven’t figured out how to make a profit off you! Can you believe it? They’ve got 10,000 writers creating 5,700 pieces of content a day, but that apparently isn’t enough critical mass to make a profitable business model.

If I were staking my income on what DS does, I’d be seriously worried about that. Unprofitable companies eventually go bust, for the most part. Essentially, DS needs the IPO money to stay afloat! After all their executive talk about how they’re the new media model that’s going to flatten traditional media. Yeah, we’ll see about that. A lot of print publications are still making money, you know.

DS’s markup is 260 percent. DS pays you $15, and the filing reveals they make an average of $54 per article. Yet, they are still hemorrhaging cash. The company lost $14.2 million on $170 million of revenue in 2008; in 2009, it was a $22 million loss on nearly $200 million in income. They seem to have improved a bit in the first half this year, only losing $6 million on $114 million. Wow, I bet if you put content up on your own site and sold ads against it, you could figure out how to make a profit…and you could keep all the profit for yourself!

I’d love to know, with what DS pays editors, where the fat is in this business model that’s making it unprofitable. It’s kind of stunning that they’re trying an IPO with this profitability record, but surprisingly, about 40 percent of companies trying the public markets right now aren’t in the black. Sort of a weird return to the dot-com days going on.

DS is in danger of being branded spam by Google. They disclose this in the section on the possible competitive threats to their business. Hmm, if that happens and Google decides to screen DS out, poof! No more Demand! A lot of Internet-watchers believe at some point Google has to find a way to screen out these sites or users are going to turn to other search engines in their search for better-quality content.

DS makes much of its money from domain-selling and domain-squatting. Turns out more than 40 percent of its revenue is from eNom, not even from the content mill. People buy domain names from eNom, and eNom runs Google ads on empty Web sites to get revenue. Weird, huh?

DS’s timing shows it’s desperate. The IPO market has perked up a bit this year from its dead stop last year, but most IPOs aren’t doing very well. The majority have gone down after issue, which is bad news for company founders and backers. The down market means only companies that HAVE to get some money right now are trying an IPO. DS could no doubt get more money if they waited a year or two. But apparently they can’t wait.

The upside here — founders and investors may not end up with much. They have to wait three months after the IPO before they can cash any of their shares, and the way the market’s been going, they may not do very well.

As many people know, I have never written for DS or any of their ilk. But I still think it’ll be pretty sweet if we can watch the folks who perpetrate this crime against fair wages get hosed on their big IPO payday.

The other thing to know is just because a company’s filed an IPO doesn’t mean it’ll go — they still have to get enough big investors interested to price it and make it go. We’ll see, given its unprofitability, if DS can sell investors on the deal.

Ready to move up from content mills? Learn how to grow your writing income in my new community, Freelance Writers Den — get your questions answered by freelance-writing pros, take e-courses, attend live events, and much more.

Join my freelance writer community


  1. Harry Milner

    So, looking back…

    It seems your prognostications were largely wrong. Demand changed its approach and is now in Google’s good graces, its traffic has soared (number 13 globally), it raised its rates and even started paying relatively well (compared to its competitors) for feature stories and it went from a company losing money (at least on paper) in 2011 to a company that earned over $6 million in profits (and climbing) in 2012.

    Where do you think you erred with your predictions, Carol? What didn’t you foresee?

    • Carol Tice

      Hi Harry —

      I guess that’s not quite how I read the numbers. They still have an accumulated deficit of around $60 million over the life of the company, so at last year’s rate it would take them another decade to truly break even! That’s not exactly a thriving enterprise.

      Yes, they have made some changes and rallied from the 25% traffic plunge they saw at one point. But the big stock spike is from their announcement to split off their domain name company — that’s still their profitable cash cow.

      They also have begun shutting some of their content sites entirely, which I take as a sign of winding that business down, not of success. They didn’t break out profit margins of their two businesses in this filing — I’ll be watching for that if they file papers to spin off one of the businesses, where they’d have to share more details. But if they did, I think you’d see all the profit is in the domain name side. In my view, they’re still grappling for a content development model that earns well.

  2. Fatima

    very well i heard content could be the KING ,
    so everything aside your story must be genuine.
    It can get noticed for sure


  1. How to Raise Your Freelance Pay Rates in the Next 60 Days - [...] instance, when content mill Demand Media filed to go public, its data revealed that it was paying writers $15…
  2. 7 Ways to Find Better Writer Pay - Right Now - [...] not enough. Writers need more information on where the good-paying jobs are.After my dissection of Demand Studios’ IPO filing,…
  3. How One Writer Found Better Pay -- and Left Demand Studios Behind - [...] JansenI used to write for content mills. I know I should be ashamed of myself, but I’m not.Working for…

Related Posts

You CAN Write a Query Letter That Gets a “Yes”: 5 Resources

Freelance writer getting a gig after learning to write a query letter.

Love them or hate them, queries are one of the most important marketing tools for any freelancer who wants to write for magazines. And the skills you learn from writing a good query letter also help business writers and copywriters pitch their potential clients.

If you’ve been sending queries off into space and never getting a reply, you may think it’s impossible to break into new magazines. But it’s not true! Editors are always looking for new talent.

To help you learn to write a query letter that will get you the gig, we’ve pulled together a collection of five of our best posts on pitching:

Can’t Write? Try These 9 Ideas for Writing Motivation

It’s the bane of every freelance writer’s life: You know you need to sit yourself down and get some writing done, but nothing happens. The writing motivation just isn’t there. Sometimes, you can't even make yourself sit down with the computer -- even if you...