Demand Media Inc., the Santa Monica company behind websites such as eHow.com and Livestrong.com, added Saatchi Art to its collection for $17 million and named the start-up’s top executive as its CEO.
Sean Moriarty said he would bring focus, experience and fresh eyes to the once wildly growing Web content creator. Traffic to Demand’s websites shrank dramatically shortly after the company went public in 2011 as they started appearing lower in Web search results because of changes to Google’s ranking system.
Demand has been attempting to pull itself back up in recent months. It has trimmed ancillary businesses and begun to redesign top-performing websites to make them less reliant on traffic from search engines and revenue from display ads.
“From a strategic perspective, it’s very much the same,” Moriarty said of his vision for Demand. “I like the categories we’re in, and I’m going to make sure our operating tempo is high and I’m going to amplify what’s already going on.”
Moriarty replaces Richard Rosenblatt, a Demand co-founder who resigned in October. Rosenblatt, the former chairman of MySpace, didn't give a reason for his departure.
In 2009, Moriarty resigned as chief executive of Ticketmaster after leading the company for two years through significant expansions and toward a merger with Live Nation Entertainment. He advised some start-ups before becoming the chief executive of Saatchi Art at the end of last year. The Los Angeles company runs a website where artists can sell their work.
Demand paid $17 million, including about $5.7 million in cash, for Saatchi Art with expectations that it would add $500,000 to $1 million in quarterly revenue in the short term.
It’s the type of community-driven website that Demand is trying to make of its entire portfolio, which also includes the comedy website Cracked.com and art-prints seller Society6. Shawn Colo, Demand Media’s president, said he came across Saatchi Art while looking at competitors for Society6.
“I was intrigued by the size, positioning and the strength of their management team,” Colo said. “Things came together at the same time, and we were able to bring Sean on board.”
Last week, Demand missed analyst estimates when it reported $89.8 million in sales during the second quarter, down more 11% from the same period last year. But executives said they are seeing good results, including a record number of new users, from the redesign at Livestrong.com. With 19 million unique visitors worldwide in June, ComScore ranked it as No. 3 health website in the U.S., Demand said. EHow, filled with how-to guides, is undergoing a similar refresh.
Overall, though Demand has been losing visitors, it remains in strong company. In June, ComScore said Demand ranked just behind Craigslist, Twitter and Yelp in terms of unique visitors from the U.S.
Demand’s stock has faced pressure since the company spun off Rightside, which sells website domain names. Shares fell to their lowest point ever after the spinoff this month, and they closed down 80 cents, or 8.2%, at $8.97 on Monday.
Colo said investors would eventually warm up to the narrowed focus at Demand.
“We’ve got a huge platform, with global scale and a good balance sheet,” he said. “I think we’re at a great starting point.”
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