* 3rd quarter adj EPS of 11 cents beat view by a penny
* Rise in Web traffic helps revenue, profit
* Raises full-year outlook
* $3.2 mln net income compares with year-ago $4.1 mln loss
By Jennifer Saba
Nov 5 (Reuters) – Demand Media Inc reported record
quarterly revenue and profit on Monday because more people are
visiting its websites such as eHow, Livestrong and Cracked.
The better-than-expected results, also buoyed by a
partnership with Google Inc’s YouTube, prompted Demand
Media to raise its full-year outlook.
“I think this is the first time we saw an indication of the
YouTube deal impacting the numbers,” said Sean Kim, an analyst
with RBC Capital Markets.
Demand Media relies on freelance writers, photographers and
videographers to provide articles and videos designed to appear
at the top of Internet searches that in turn generate
advertising.
The company said third-quarter revenue, excluding traffic
acquisition costs, rose 19 percent to $92.8 million. Analysts on
average were expecting $91.5 million according to Thomson
Reuters I/B/E/S.
“Demand Media’s audience surpassed 125 million monthly
unique visitors during the third quarter, as we delivered record
revenue and profitability,” Richard Rosenblatt, chairman and
chief executive of Demand Media, said in a statement.
Demand Media, which went public last year, is being
carefully watched as a new media model that lowers the costs of
producing content.
Last year, however, Demand Media had to shift its business
model when Google made changes to the way its search engine
produced results to weed out content it considered “low
quality.”
The company cleaned up its archives and implemented checks
to raise the level of its content and also struck up a
partnership with the Internet search company in the fourth
quarter of last year.
That alliance to produce content to its channels helped
boost the amount of revenue Demand received from its network of
partner sites by 50 percent.
Thirty-seven percent of third quarter revenue was from
Google, Demand CFO Mel Tang said on a conference call with
analysts and investors.
Demand has roughly 20 partnerships where its content is
published, including Gannett Co Inc’s Arizona Republic.
Rosenblatt said on the call that Livestrong’s traffic or
metrics have not been materially impacted by Lance Armstrong.
Armstrong, who founded the cancer charity, stepped down as its
chairman over a doping scandal.
“Our relationship is with the Livestrong Foundation, not
Lance,” Rosenblatt said.
The company raised its full-year forecast for revenue
excluding traffic acquisition costs to between $359.8 million
and $361.8 million from $355.5 million to $359.5 million.
For the year, adjusted EPS is expected to be in the range of
37 cents to 38 cents per share versus the previous forecast of
35 cents to 37 cents per share.
Net income for the third quarter was $3.2 million, or 4
cents per share compared with a loss of $4.1 million, or a loss
of 5 cents per share, in the same period a year ago.
Adjusted for stock-based compensation and other items, the
company reported earnings per share of 11 cents, beating
analysts’ forecast by a penny.
Demand shares closed up 6 percent at $8.74 on Monday.
