January 12, 2011 10:09 pm

Demand looks to raise $138m in IPO

Demand Media, an internet start-up that mines search engine data to generate stories on popular topics, said on Wednesday it hoped to raise as much as $138m in its forthcoming initial public offering, setting the stage for what looks to be a more active year for technology and media IPOs.

The company, which owns popular websites including LiveStrong and eHow, will offer up to 8.625m shares, which will be priced between $14 and $16. Demand will offer 4.5m of that total, existing shareholders will offer 3m shares, and underwriters will have the option to sell 1.125 shares.

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This values the company at about $1.25bn, a slight dip from last year, when Demand estimated its worth to be about $1.5bn, according to people close to the company. The details were included in an amended prospectus filed with the Securities and Exchange Commission.

Other media and technology companies poised to hit the public markets this year include Nielsen, the media rating agency, Hub, the online video hub, LinkedIn, the social network, and Groupon, the local deals site.

Demand Media was founded by Richard Rosenblatt, the former MySpace executive who sold the company to News Corp in 2005. The company employs an army of freelance writers to produce articles on popular topics, current events and how-to subjects designed to attract clicks from search engines.

Revenues come from advertising, which Demand said was between $68m and $70m for the quarter ending December 31 2010.

Some traditional media outlets have criticised Demand and other so-called “content farms” for the perceived low quality of their work and the unfavourable pay received by writers. But the company has struck deals to feature content in publications including USA Today and the San Francisco Chronicle.

The company also has a close relationship with Google, the search engine, which sends much of the traffic to Demand sites. But several prominent web critics have recently said that Demand and other content farms are diluting the quality of Google search results. In its filing, Demand says a big risk factor to its business is the prospect of a disruption to its relationship with Google.

Shares will list on the New York Stock Exchange. Goldman Sachs and Morgan Stanley are the lead underwriters, with UBS, Allen & Company and others participating.

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