Demand Media Reports Second Quarter 2015 Financial Results

Santa Monica, CA - Demand Media, Inc. (NYSE: DMD), a diversified Internet company comprised of several media and marketplace properties, today reported financial results for the second quarter ended June 30, 2015.

• Demand Media Properties Reach Nearly 50 Million Unique Monthly Visitors in the US
• Marketplaces Revenue Grows 59% Year-over-Year
• Total Revenue of $29.8 Million and Adjusted EBITDA of $(2.8) Million

"I am very pleased by the growth we are seeing in several of our businesses including Society6, Cracked, and StudioD," said Sean Moriarty, CEO of Demand Media. "We are becoming a much stronger company as we focus on building the best possible platforms and products to connect our creators and audiences. We look forward to continued progress across our businesses in the second half of the year."

Q2 2015 Financial Summary:

Demand Media is comprised of two service offerings: Content & Media and Marketplaces.

“Our financial results this quarter are consistent with the current stage of our ongoing transformation,” said Rachel Glaser, Demand Media’s CFO. “While revenue and traffic continued to grow for several of our properties, this growth was more than offset by the impact of strategic decisions that we have made in our eHow business.”

For the second quarter of 2015:

• Total revenue declined 31% year-over-year due to a 47% decline in Content & Media revenue partially offset by a 59% increase in Marketplaces revenue.
• Content & Media revenue declined 47% year-over-year driven primarily by traffic declines to eHow and lower ad monetization yields.
• Marketplaces revenue grew 59% year-over-year, driven primarily by traffic growth, stronger conversion rates, new product introductions and increased average revenue per transaction resulting from a shift towards higher priced items on Society6, as well as the acquisition of Saatchi Art in August 2014.
• Adjusted EBITDA was $(2.8) million for the quarter, primarily reflecting the expected decline in higher margin advertising revenue in the Content & Media service offering.
• Cash and cash equivalents was $42.3 million at period end with no debt outstanding.

Business Highlights:

• On a consolidated basis, Demand Media ranked as the #57 US digital media property across desktop and mobile platforms in June 2015. Demand Media’s properties reached nearly 50 million unique visitors in the US, including nearly 29 million mobile visitors (source: June 2015 US comScore).

Content & Media:

• The eHow turnaround is now well underway. Led by eHow’s new GM, Mitchell Pavao, the team continues to be focused on building immersive products showcasing do-it-yourself creators across its key categories. eHow.com reached over 27 million unique visitors in the US in June 2015 across desktop and mobile platforms (source: June 2015 US comScore).
• Livestrong.com has seen a significant increase in traffic with total visits up 42% year-over-year in the second quarter based on internal data. To date this year, nearly 8 million workouts have been tracked on Livestrong.com and its apps, up 40% year-over-year. Livestrong/eHow Health had over 25 million unique visitors in the US in June 2015 across desktop and mobile platforms (source: June 2015 US comScore).
• Cracked has seen significant growth in video views across YouTube, Facebook, and on the Cracked site itself with total views up more than 75% year-over-year in the second quarter. The CollegeHumor/Cracked Network ranked as the #1 Humor property in the US in June 2015, with more than 18 million unique visitors across desktop and mobile platforms (source: June 2015 US comScore).
• studioD, our content solutions business, is building a content marketing and publishing platform driven by predictive insights and performance analytics and signed several deals during the quarter with new and returning customers, including Famous Footwear and Choice Hotels.

Marketplaces:

• Society6 launched two products in the second quarter – leggings and all-over print t-shirts – bringing the total number of available products to 24. The Society6 community of artists and designers has contributed over 2.3 million unique designs to date.
• This quarter, Saatchi Art continued to highlight the work of emerging artists both online – with the presentation of the seventh edition of our signature “Invest in Art” series – and offline, hosting a solo show in Manhattan and a group show in Brooklyn.

About Demand Media

Demand Media, Inc. (NYSE: DMD) is a diversified Internet company that builds platforms across its 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 branded content creation (studioD) and programmatic advertising (Demand360) 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 the company’s future financial performance, and are based on current expectations, estimates and projections about the company’s 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 the company’s operating and financial results are described in Demand Media’s 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 Demand Media’s 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 the company’s owned & operated online properties and its customers’ online properties; the effects of shifting consumption of media content from desktop to mobile; the company’s dependence on material agreements with a specific business partner for a significant portion of its revenue; the fact that the company generates the majority of its revenue from advertising and the potential impact of a reduction in online advertising spending, a loss of advertisers and/or lower advertising yields; the impact on revenue and expenses of changes being made to the company’s Content & Media properties that are intended to improve user experience and engagement; the company’s ability to successfully grow new lines of business such as online marketplaces and branded content creation; the impact of Demand Media’s separation into two 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 the company’s ability to retain key personnel. From time to time, the company 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. The company does 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.