April 16, 2010 1:09 am

Demand Media enlists Goldman for IPO

Demand Media, a closely watched startup that mines online search engine data to generate thousands of videos and web stories a day, has hired Goldman Sachs to explore an initial public offering.

People familiar with the plans say the company could file for an IPO as early as August. Details have yet to be finalised, but the discussions involve pricing shares around November in an offering valuing the company at about $1.5bn.

Since 2006, Demand has raised $355m, attracting funding from Goldman Sachs, Oak Investment Partners, Spectrum Equity Investors and Generation Partners.

Demand and Goldman declined to comment.

Demand was founded by entrepreneur Richard Rosenblatt, former chairman of MySpace, who brokered the $580m sale of the social network to Rupert Murdoch’s News Corp.

Mr Rosenblatt has attracted the attention of investors such as Gordon Crawford, a Capital Research portfolio manager who was an early backer of Yahoo. The two men were seen together at last year’s Sun Valley media conference sponsored by Allen & Co. Yahoo’s top advertising executive, Joanne Bradford, joined Demand in March.

Demand has created a system through which writers and programmers are assigned stories or projects based on a software algorithm, which determines the interest of web visitors and calculates potential revenues from the content.

Mr Rosenblatt told the Financial Times last year that the company focuses on entertainment or instructional videos.

The company has struck deals to supply content to mainstream news organisations such as the Atlanta Journal-Constitution and Gannett’s USA Today.

Demand creates about 4,000 video clips and articles per day, and has been a leading contributor of videos to Google’s YouTube, the world’s most popular online video service.

People familiar with the company said it is expected to generate about $250m in revenue annually.

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