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Demand Media raises $120 million for a bunch of shell Websites

Updated

demandmedia.jpg
Here's news that former MySpace.com chairman Richard Rosenblatt, has raised $120 million to create a company called Demand Media to buy up or create a bunch of generic Web sites that have no staff generating real content of their own.

Rather, they will exist simply in hope you will land there either by mistake, confusion or idle curiosity -- and to make money when you land there by having advertisers (provided by the likes of Yahoo and Google) pay for your click through to that site. The company is now also busy buying up cheap ways to feed content into the sites, and hopes to rely on the public to produce stuff too.

The financial backing comes from Spectrum Equity Partners, Oak Investment Partners and Generation Partners, according to the WSJ.

One example mentioned is www.flashgames.com, which doesn't even have games. All it offers is a list of links to other game sites. Yet it earns revenue of more than $150,000 a year selling online ads, or so the article says. Ridiculous, if true. No word on where this company is based.

(Update: 5/3, added the link to the company's Web site above. The company is based in Los Angeles, with offices in Seattle, according to the site).


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Comments

It's certainly feasible that this strategy could work. Using AdSense or Yahoo Publisher Network, a web site owner can typically generate $.01 to $.03 in advertising revenue for each user page visit. So, to generate $150k/yr would require 7.5 million page views per year, or 20,500 page views per day. If the avg visitor views 5 pages or so, then this would require 4,000 visitors per day, which is not all that much traffic.

Terry Whalen on May 2, 2006 10:19 AM
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That is a great strategy, as long as step one is:
Rewind clock back to 1996

Blowhard on May 2, 2006 3:36 PM
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I'm not exactly I understand why this business model takes $120 million of capital, but I may be missing something.

Call me simple minded, but I just don't get where the value is.

Dharmesh Shah on May 2, 2006 4:58 PM
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I'm at a loss too. Especially when there are other companies out there already doing similar things.

Advertising bubble in full stretch?

Matt Marshall on May 2, 2006 5:15 PM
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Makes perfect sense if you understand that the parked domain business is 10% of Google's business. AdSense in parked domains is Googles quiet cash cow. Yahoo does the same type of feeds.

Common Sense on May 2, 2006 5:55 PM
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Sounds like the Seinfeld of Web 2.0 - a website about nothing.

Lee C. on May 3, 2006 10:27 AM
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Lots of people do this (w/o $120MM I might add); the search engines usually consider them spammers, and block the sites when they find them. The prospects for this venture look severely limited if Yahoo!, Google and MSN kick these pages out of their search engines. When I was at Yahoo! we took a very dim view of a site that posted no unique content and just tried to use duplicate content (RSS news feeds, etc.) as an excuse to show ads (and no special treatment if they were Yahoo!'s Overture ads).

Jon on May 3, 2006 10:45 AM
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There's got to be more to it. Otherwise . . . well, he did OK with MySpace.

Ed Delia on May 3, 2006 12:22 PM
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