Something strange has happened on the way to Demand Media's IPO. For the last several years, Demand Media has been like a tornado ripping through traditional media. The company's model is to produce hundreds of thousands of evergreen pieces and videos for the Web, for which it pays maybe $20 apiece. These are published on the very popular site eHow.com and a handful of lesser-known sites. Demand also makes money by customizing content for large sites like USAToday.com, and through an ad network.
Demand's audience exploded to more than 80 million unique visitors a month in June, according to ComScore. That's up from next to nothing in just four years or so, a rise that all other content companies envy. Depending on who 's counting, Demand Media is now the 16th or 17th largest Web network in the country. Wired published a breakthrough profile of the company last fall, and on Friday Demand filed papers with the Securities and Exchange Commission for an initial public offering of shares, underwritten by Goldman Sachs and Morgan Stanley.
But here's the anomaly: In the two weeks leading up to its IPO filing, traffic to Demand sites, as "directly measured" by Quantcast, apparently plummeted by as much as 75 percent over the last few days. (Since Slate inquired with Demand Media about this, Demand has hidden its traffic data on Quantcast from public view, but here is a screen grab taken Tuesday morning.)
Such a sudden and precipitous drop has no precedent in Demand's otherwise rocketing trajectory, and the timing so close to the IPO filing is especially curious. Quinn Daly of Demand Media said that the company could not comment because it is in a "quiet period" initiated by the filing.
What's even stranger, though, is that the traffic drop is probably illusory. The Quantcast-reported traffic to eHow.com—by far the largest Demand site—shows a dropoff to zero in late July. Clearly, traffic to eHow remains greater than zero; the Web measurement firm Alexa, which uses a different methodology, actually shows eHow traffic growing somewhat in the month of July.
Still, even if there's nothing wrong with eHow's or Demand's traffic, it's unfortunate to be reporting that your numbers are way down at the very moment when you're trying to demonstrate your strength to a new class of investors. So what happened?
Maybesomething has gone haywire in how Quantcast measures Demand's traffic. A Quantcast spokeswoman said that occasionally its tags fall off sites "when they are making some sort of modifications." That would be unfortunate, because in general, Quantcast numbers for "directly measured" sites are the most accurate publicly available figures in the business; publishers agree to place Quantcast code directly on their sites in the expectation that the numbers will be more flattering than those measured through other firms, such as ComScore, which for various reasons tend to undercount Web traffic. To have inaccurately low numbers for your site publicly visible on Quantcast defeats the very purpose of Quantcast.
Another possibility is that Demand decided that, with public investors on the horizon, it no longer wants its traffic measured by Quantcast. Such figures could be used to predict quarterly earnings, which could create expectation headaches. In the wildest possibility, the company could even have something to hide; imagine that until recently, as part of its aggressive growth strategy, Demand was either paying for traffic, or deploying "black hat" search-engine-optimization techniques. Then, in anticipation of the increased scrutiny that would accompany an SEC filing, the company's management decided that it had better present as clean a situation as possible, lest it be accused of misleading investors.
That could actually put Demand in hot water. The SEC filing specifically states that in June, Demand "attracted over 86 million unique visitors with over 550 million page views globally." If there's anything fishy about those numbers, Demand will have to answer to investors and might even have to amend its filing.
If there is a benign explanation for this, Demand will probably be able to satisfy its investors by showing internal traffic numbers. As for the general public, we'll have to wait until the company feels it can provide an explanation. Got another theory? Write to firstname.lastname@example.org.
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