Demand for more

26 January 2011 By Robert Cyran Follow @rob_cyran

Investors can’t get enough of the cheap Internet content factory. The company upsized its offering, raised the sale price and the shares still popped 38 pct in early trading. Yet Demand is littered with red flags. Just imagine how higher quality Web firms will be received.

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Demand Media increased the number of shares and the price in its initial public offering. The company and its shareholders sold 8.9 million shares for $17 each. They had planned to sell 7.5 million shares for $14 to $16 each. The shares rose 38 percent in early morning trading on Jan. 26.

The company owns websites, produces 5,700 pieces of content for them daily and runs an Internet domain registry service. It sold 4.5 million shares and existing investors sold another 4.4 million.

On Jan. 21, Google's principal engineer, Matt Cutts, said on an official blog that the search engine would do a better job of eliminating low quality articles and videos produced by "content farms" from search results. Demand Media made 28 percent of its revenue from advertising arrangements with Google in the first nine months of 2010.

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