There can be little doubt that there’s a market for content produced by so-called content farms. And that this is having an impact on the market for online content in general.
But are content farms sprouting profits that match the popularity of their business model? Perhaps not.
Demand Media, which is arguably the Farmville of content farms, has received a lot of attention because of the apparent success of its business model, which relies heavily on freelancers knocking out content designed for search engines like Google to gobble up.
Much of that apparent success was based on statements made by the company’s CEO, Richard Rosenblatt. As the Wall Street Journal has noted, Rosenblatt has been indicating that Demand Media is a profitable company for a couple of years now. In a 2008 interview, he even went so far as to state that Demand Media is “highly profitable.“
Since Demand Media is a private company, the words of the company’s CEO have had to suffice when it comes to guesstimating just how viable the content farming business is. But now that Demand Media has filed to go public, necessitating the release of company financial information, a different picture has emerged. And that picture is of a company that has not only never been profitable, at least by the standard accounting measures commonly associated with the word, but that in 2009, even saw its losses grow.
Not surprisingly, this makes for an interesting discussion for financial types, but for those interested in the business of online publishing, the discussions is far bigger than just one company.
Is the notion that an army of freelancers can produce content (more) profitably than skilled journalists just a pipe dream? If companies knocking out SERP-bait content on a massive scale aren’t “highly profitable“, what does that tell us about ad-supported content online? If the model doesn’t work in a pure play fashion, should traditional publishers think twice about employing the model?
Obviously, Demand Media is still a young company. It’s also fair to point out that it has multiple ‘businesses‘ and has been active on the acquisition front. But given that Demand Media has been a poster child for content farming, the fact that it isn’t quite as successful as many of us had been led to believe serves as a reminder: ad-supported content online is tough, no matter how that content is produced.