Demand Media wags a long tail of niche websites

An earlier version of the caption above said that Demand Media's most recent acquisition was LiveStrong.com. LiveStrong.com was not an acquisition but was developed jointly by Demand Media and athlete and cancer survivor Lance Armstrong.

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But the excitable 39-year-old USC law school graduate has a plan for the future of Internet media, and $355 million from private investors says he can pull it off.

With blinding speed and little notice, Rosenblatt's 2-year-old Demand Media Inc. has become one of the largest buyers of articles and video clips for the Web. It expects revenue of nearly $200 million this year and, more surprisingly, a healthy profit.

"This is fascinating," said Michael McGuire, a Gartner analyst who has followed Web media companies for eight years. "Is this a potential out-of-nowhere media titan? This would seem to be, yeah."

Demand Media is the kind of company that, if headquartered in Silicon Valley, would generate major buzz. Based instead a few blocks from Santa Monica Pier, it's been largely ignored.

Yet Rosenblatt, Demand Media's chief executive, has quietly amassed a network of thousands of websites such as EHow, Expert Village and a slew of special-interest sites including GolfLink, Trails.com and Daily Puppy. The most recent: LiveStrong.com, a health site developed with cyclist and recent Demand Media investor Lance Armstrong.

Although none are huge hits, together they rank among the Internet's 50 most visited Web networks, according to rating service ComScore Inc. Demand is doing so well that some Yahoo executives have expressed interest in buying it; Rosenblatt said the company isn't for sale.

Unsatisfied with its current library of 100,000 online videos and more than 250,000 articles, the company is adding thousands more daily from freelancers and pumping them across the network.

Demand Media combines the draw of specialized, semiprofessional content with the well-documented "stickiness" of social networking sites -- the tendency of people to hang around when there is a community of like-minded individuals. Low-cost tools that enable users to comment, rank stories and find other users help keep them there.

At a more basic level, the 470-employee company is mastering the new Google economy. In the same way that EBay Inc. turned homebound merchants into millionaire "power sellers," Google can assemble niche audiences and bring them to previously undiscoverable destinations, which the search kingpin's advertising programs then can make profitable.

Drilling down

The more obscure the subject, the more likely that one of Demand Media's websites appears on the first page of Google search results.

"Google finds the Long Tail," Rosenblatt said, referring to the Web industry term for less-popular content, "and we fill it."

MySpace and its younger rival Facebook Inc. are general-interest social networking sites, each with more than 100 million users across the globe. But Demand Media drills down into narrower interest groups, which can make the audiences much more valuable to advertisers.

"MySpace and the others need behavioral advertising and hyper-targeting to figure out why their users are on the site," Rosenblatt said. "If you're a golf club manufacturer, why go through that? There's no mystery why someone is at GolfLink."

Rosenblatt's first Internet venture also was designed to help small businesses attract more customers. In 1994 he co-founded IMall Inc., which created electronic storefronts. He sold it five years later to Excite at Home for more than $565 million in stock, much of which disappeared in the bust.

Then came a stab at investing. He bought and sold a domain-name company, which taught him how Google could bring money to unloved corners of the Web, and he put together a group that took control of DrKoop.com for $27 million in 2000, after that stock had cratered. Rosenblatt became CEO, but the company liquidated the following year, giving him that much more respect for the bottom line.

Rosenblatt joined Intermix Media Inc., a mishmash of entertainment and market websites, as CEO in 2004. He gets credit from fellow executives there for encouraging the development of MySpace, the social networking site that dethroned Friendster four years ago and is still No. 1 in U.S. visitors.