Demand Media downplays Google algorithm hit, but quarters ahead will tell tale

Demand Media downplays Google algorithm hit, but quarters ahead will tell tale

Summary: Demand Media said its first quarter results remain on track and that its' second quarter page view growth will be on par with a year ago. Demand was countering reports that its eHow site was whacked by a Google algorithm change.

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Demand Media said Monday that its first quarter results remain on track and that its' second quarter page view growth will be on par with a year ago.

The company made the statement after Google rolled out its international update for its new algorithm, which is designed to improve content quality. Sistrix noted that Demand Media's eHow took a hit on the international rollout.

Reading Demand's statement and blog post it appears that the company has weathered the worst of Google's algorithm storm. However, this algorithm change is likely to play out over the coming quarters. CNet has been tracking the algorithm change fallout, but the reality is sites don't quite know how things will shake out over time. Google is a fickle traffic friend sometimes and a big chunk of Demand's revenue rests with the search giant.

Demand acknowledged that "recent search engine algorithm changes have negatively impacted search driven traffic to some of our websites, including eHow.com." The upshot is that the company is seeing moderately lower page view growth for owned and operated sites.

Among the points to ponder:

  • Demand says that its page view growth for owned and operated sites will be on part with a year ago for the second quarter. But the only thing that matters here is revenue. Demand Media gets 29 percent of its revenue from cost-per-click advertising from Google.
  • eHow accounted for 25 percent of Demand's revenue. Any drop in Google's rankings is going to hurt.
  • The company reiterated its 2011 outlook. Wall Street is expecting Demand to report earnings of 23 cents a share on revenue of $309.6 million in 2011.
  • And the company is racing to diversify its traffic based. Demand is starting to talk about Facebook likes more.

Bottom line: Google's algorithm change is rejiggering Demand's traffic picture, but we won't get a glimpse of the moving parts until the company reports a few quarters. The first quarter results land May 5.

Topics: Enterprise Software, Banking, Google

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