Demand Media Reports First Quarter 2015 Results

Santa Monica, CA. - Demand Media, Inc. (NYSE: DMD), a diversified Internet company, today reported financial results for the first quarter ended March 31, 2015.

“While we aggressively continue the transformation of eHow, we’re encouraged by another quarter of strong results from our Marketplaces, Content Solutions, and Livestrong businesses, and we are confident we are heading in the right direction,” said Sean Moriarty , CEO of Demand Media. “With strong additions to an executive leadership team that is judiciously managing cash and making investments, we are well positioned operationally.”

Demand Media’s new Chief Financial Officer, Rachel Glaser , joined the company in April. “I am very pleased to be joining Demand at this time when we have a clear set of strategic priorities, tremendous opportunities for future growth and a healthy balance sheet as a foundation,” said Glaser.

• Revenue of $33.2 Million and Adjusted EBITDA of $0.5 Million
• Marketplaces Revenue Increases 59% Year-over-Year
• Cash Balance of $47.3 Million at Period End with No Debt Outstanding

Q1 2015 Financial Summary:

Demand Media is a diversified Internet company that builds platforms across media and marketplace properties to enable communities of creators to reach passionate audiences in large and growing lifestyle categories, while helping advertisers find innovative ways to engage with their customers. Our business is comprised of two service offerings: Content & Media and Marketplaces. Our Content & Media service offering operates leading online destinations such as eHow, Livestrong.com and Cracked, as well as an innovative content creation platform powered by a large community of experts. Through our Marketplaces service offering, we operate Society6, a community of artists marketing and selling their designs on a wide variety of lifestyle products, and Saatchi Art , a community of artists marketing and selling original artwork or reproduction prints.

• Total revenue declined 26% year-over-year due to a 41% decline in Content & Media revenue partially offset by a 59% increase in Marketplaces revenue.
• Content & Media revenue declined 41% year-over-year driven primarily by desktop traffic declines to key properties, lower ad monetization yields from our cost-per-click advertising, our strategic reduction in higher yielding direct sold display advertising, content reductions on eHow and the impact from selling our CoveritLive and Pluck social media businesses.
• Marketplaces revenue grew 59% year-over-year, driven primarily by traffic growth, stronger conversion rates, new product introductions and increased average revenue per transaction driven by a shift towards higher priced items on Society6, as well as the acquisition of Saatchi Art .
• Adjusted EBITDA was $0.5 million for the quarter, primarily reflecting the expected decline in higher margin advertising revenue in our Content & Media service offering.
• Cash and cash equivalents was $47.3 million at period end with no debt outstanding.

Business Highlights:

• On a consolidated basis, Demand Media ranked as the #41 US digital media property across desktop and mobile platforms in March 2015. Demand Media’s properties reached more than 57 million unique visitors in the US, including approximately 31 million mobile visitors (source: March 2015 US comScore).

Content & Media:

• The renovation of eHow continued during the first quarter, with additional improvements to the site, content library, and mobile experience. We have added media rich content and taken down a large number of articles with duplicative content. To improve the mobile experience, we changed the layout for easier readability and improved the share-ability of articles. eHow.com reached nearly 34 million unique visitors in the US in March 2015 across desktop and mobile platforms (source: March 2015 US comScore).
• Livestrong.com has seen a significant increase in traffic since it began its renovation nearly 2 years ago. This quarter, the property saw more than 10% growth in user registrations, engagement and app downloads. Livestrong/eHow Health ranked as the #4 Health property in the US in March 2015, with nearly 28 million unique visitors across desktop and mobile platforms (source: March 2015 US comScore).
• Cracked has been focusing on video content creation and promotion and has seen significant growth in views across YouTube, Facebook, and on the Cracked app. The CollegeHumor/Cracked Network ranked as the #1 Humor property in the US in March 2015, with more than 16 million unique visitors across desktop and mobile platforms. Cracked.com itself had more than 7 million unique visitors in the US across desktop and mobile platforms (source: March 2015 US comScore).
• Our Content Solutions business, which develops and executes custom content marketing strategies for brands and publishers, experienced an increase in active projects and closed several new deals during the quarter.

Marketplaces:

• Society6 launched another new product, wall tapestries, which brings the number of products available for customization on the site to 22 products. The site now has over 2 million unique designs available to be printed on these products – an increase of approximately 48% from a year ago.
• Saatchi Art saw strong growth in the number of artists and artworks on the platform and now has over 500,000 original works of art for sale on the site. This quarter, Saatchi Art also launched a new series of solo shows highlighting the work of emerging artists, the first of which was hosted in London in March.

About Demand Media

Demand Media, Inc. (NYSE: DMD) is a diversified Internet company that builds platforms across our media (eHow, LIVESTRONG.com and Cracked) and marketplace (Society6 and Saatchi Art ) properties to enable communities of creators to reach passionate audiences in large and growing lifestyle categories. In addition, Demand Media’s Content Solutions and Demand360 programmatic offerings help advertisers find innovative ways to engage with their customers. For more information about Demand Media, visit www.demandmedia.com.

Cautionary Information Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements involve risks and uncertainties regarding our future financial performance, and are based on current expectations, estimates and projections about our industry, financial condition, operating performance and results of operations, including certain assumptions related thereto. Statements containing words such as guidance, may, believe, anticipate, expect, intend, plan, project, projections, business outlook, and estimate or similar expressions constitute forward-looking statements. Actual results may differ materially from the results predicted, and reported results should not be considered an indication of future performance. Potential risks and uncertainties that could affect our operating and financial results are described in our annual report on Form 10-K for the fiscal year ending December 31, 2014 filed with the Securities and Exchange Commission (http://www.sec.gov) on March 16, 2015, as such risks and uncertainties are updated in our annual and quarterly reports on Form 10-K and Form 10-Q filed with the Securities and Exchange Commission, including, without limitation, information under the captions Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations. These risks and uncertainties include, among others: changes in the methodologies of internet search engines, including ongoing algorithmic changes made by Google, Bing and Yahoo!, as well as possible future changes, and the impact such changes may have on visits and driving search related traffic to our owned & operated online properties and our customers’ online properties; the effects of shifting consumption of media content from desktop to mobile; our dependence on material agreements with a specific business partner for a significant portion of our revenue; the fact that we generate the majority of our revenue from advertising and the potential impact of a reduction in online advertising spending, a loss of advertisers or lower advertising yields; changes in our Content & Media business model to improve user experience and engagement, including redesigning our websites, refining and consolidating our existing content library, reducing the number of advertisements per page and developing a greater variety of content formats, and the impact of such changes on revenue and expenses; our ability to successfully grow new lines of business such as online marketplaces and content solutions; the impact of the separation of our business into two separate smaller, less diversified public companies; the expectation that the separation transaction is tax-free; changes in amortization or depreciation expense due to a variety of factors; potential write downs, reserves against or impairment of assets including receivables, goodwill, intangibles (including media content) or other assets; and our ability to retain key personnel. From time to time, we may consider acquisitions or divestitures that, if consummated, could be material. Any forward-looking statements regarding financial metrics are based upon the assumption that no such acquisition or divestiture is consummated during the relevant periods. If an acquisition or divestiture were consummated, actual results could differ materially from any forward-looking statements. We do not intend to revise or update the information set forth in this press release, except as required by law, and may not provide this type of information in the future.