Epic Fail: The Rise and Fall of Demand Media
variety.com
variety.com
Hahaha! Yeah, let me fix that for you: "companies that produced lots of useless, worthless, trash content got penalized".
Good for Google, good for everyone, screw Demand media for ad-filled "content farms" on crappy domains like 3d-blueray-players.com".
Even eHow and Livestrong are borderline spammy, although they do have enough good content to make them popular (and they are).
Should've focused on quality content while they were a $2 billion company instead of whining about it now.
Pretty weak article overall.
Anyway, I hate when they do that - Instructables is the first one that comes to mind (they offer a paid subscription for viewing articles on a single page).
They're not actually impeding anyone from viewing content, say for instance like Quora blurring posts or similar.
Nothing wrong with that, I wished people were more understanding of how companies sometimes need to do mildly unpleasant things in order to keep a product afloat so that everyone can enjoy it. Some of the things on Instructables are pretty awesome, especially a few years ago I would've had a very hard time in finding an equivalent for their various technology tutorials.
It is sad that most people do not pay for things unless you poke them a bit.
We had a similar opportunity. We built Accumulist in 2006. We wanted stories posted to Accumulist to do well at Google, but we succeeded way beyond our expectations. Something about the structure of Accumulist hit the sweet spot of whatever algorithms that Google was using during 2006. Any article posted to Accumulist jumped to the front page of Google. Accumulist had an API so outside bloggers could ping it with their stories, and generally, for any story posted to Accumulist, the page that got ranked in Google was the page on Accumulist, rather than the original page on the blog.
For us, at the time, Accumulist was one of many projects we were working on. It was an unexpected hit. We did think about making it our full time focus. I was in favor of expanding it. However, my partners were against it. At one point we were working with an outside consultant whose advice I greatly respected. He said, "The business plan can not consist soley of 'Accumulist ranks high with Google.'" And that was a good argument.
For businesses like Demand Media and Accumulist, I think ranking highly with a search engine can only be the beginning of a process. If that's all you've got, then quit. There has to be something else you can do, something to add to the process, something real, that gives your business independence from the other business that you are initially depending on. Otherwise I think you are building your business on sand, and its only a matter of time before it washes away.
This is really a variation of the general notion in business that you are in trouble if you only have several big customers or a few customers control most of your destiny. In this case of course google is not a customer but it's really the same thing. Eggs in a basket. Anyone with any history in business would quickly realize the problem with putting all your eggs in one basket.
Certainly one of the reasons I am not a fan of SEO. Live by the sword die by the sword. Rank high at SEO and you can lose that rank.
Less likely if you are paying for your advertising.
Back in the day the furniture and department stores that were paying for advertising in the local paper had a good situation. A barrier to entry against competition because they paid. It wasn't free. Likewise I was very successful with the yellow pages in on past business. Any competitor could have done the same thing. But they didn't. They were to cheap to just take a chance, even with a small advertisement. I liked the fact that I paid for those ads. They worked very well. Each year we took out a bigger ad.
Let's take a real world case here. Let's take grellas who gets almost certainly business from his postings on HN. Let's further assume the fact that he is to big and popular to fail and that he is not likely or even close to likely to get banned from HN. As if.
But now let's add that he has managed to build his firm with more associates and rent more space as a result of being on HN (speculation on my part for the purpose of my point). Now let's say something happens and all the sudden HN is not in favor anymore. After all nothing is guaranteed. What does grellas do then (with all that overhead)? How will he quickly come up with more work?
Would be much better if grellas had a formula for business that he paid for or had more control over.
Not making a specific judgement or suggestion that grellas stop posting or that he is not spending his time wisely. Just drilling down to illustrate that if you get something you don't pay for you lose a certain amount of control (and a barrier to entry) that having to pay gives you.
Demand Media isn't the same - "Google traffic" was the recurring business. When that went away they were screwed.
(Also, I think it's inadvisable to name real people in hypothetical scenarios without their permission.)
"Also, I think it's inadvisable to name real people in hypothetical scenarios without their permission"
Why? Grellas is a public commenter here (whose identity is well known) on quite a large scale. And he is referred to by others in comments. To me it's really no different than making a comment on any commenter.
Now if I said "Jane who works for PG" (just made that up) "has to be concerned if bla bla bla" that would be different perhaps.
For that matter tptacek has mentioned his wife's name as "Erin" iirc. If he hadn't mentioned her it might be wrong (if I knew her name) to disclose it or to talk about her in any way or that he is even married. Or to disclose the street which he lives on. Etc.
I would be curious what others think about this. Not sure I see how using grellas as an example was wrong but I'm open to others thoughts on this.
Because you are inserting them in a hypothetical scenario.
Imagine the case where an investor Googles their name, finds your discussion of the supposed weakness in their business model and refuses to invest because of how weak their business model is.
Or - perhaps even more likely - imagine software that runs sentiment analysis on people's usernames. Suddenly you have associated them with negative sentiment...
The other part, depending on the whims of a big player for your traffic which is a big issue even if there is value.
After all the chance of a site going down in rankings enough to impact profits is much greater than the chance that anyone is going to complain (as a group) to get that previous ranking restored. Or certainly the site operator can go in most cases and pound sand.
So let's say you are "perlanswers.com" (arbitrary for example name not even registered) and you currently rank near the top. Then all the sudden you don't rank near the top and you fall to #8 or #15 which greatly hurts traffic. You can't complain and even if you have a loyal customer base "meaningful value" they really aren't going to be able to do much either. Right?
Of course if you have a large group of people typing in perlanswers.com that's a different story. But how many times does that happen as opposed to the "other" way people tend to get answers?
The mistake Demand Media made was creating a lot of crappy content. They weren't delivering much user value; their real skill was search-driven eyeball arbitrage. When Google tuned their search engine to deliver more value to their users, Demand got squeezed out and had nothing to fall back on.
"shitty news" has entertainment value. People read shitty news because it's entertaining. If it's not accurate that is not the same problem as crappy instructions on how to fix a leaky roof (where the goal is to solve a problem not be entertained.)
You are forgetting though (in this Walmart example) that Walmart provides volume. And volume drives down your costs. A big customer may very well be a necessary evil that you can't avoid.
Manufacturers are also known for selling the same (or slightly different or even inferior) product through multiple channels in order to drive down costs. (And example might be Sears private labeling washing machines manufacturered by Westinghouse).
"Demand Media made was creating a lot of crappy content"
Agree with that.
The vast majority of the economy runs on that formula, which ironically is often self-sustaining (the workers treated like shit are the primary consumers of garbage).
I'm sure that has to be an attractive outcome for a pretty large population of business people, VCs included.
What a crock - what cautionary tale? A company that grew really fast, is still producing lots of cash, and is already public? Companies rise and fall and are dependent on lots of other forces. Airbnb could crash any time if cities decided they don't want it (I doubt it will), same with Uber, and TONS of companies are in some way dependent on Google not shutting them out.
Seems like this was a pretty crappy business with extremely low value added to the world, but it's so obnoxious to hear every single company that starts to decline or doesn't grow the way we thought it would as a "cautionary tale". Companies grow, companies die.
Their business is struggling just to break even on an operational basis, and has been for years.
This is not to defend the business, I have no interest in doing so, but the ONLY thing about this that is even reasonably a cautionary tale is building a business that has no intrinsic value to anyone. Those businesses have little chance, but that's the point they're making when they declare it a cautionary tale.
DM has a reputation on here as some sort of shitty content farm, but that's just a fraction of what we do. Maybe that's just the only part of the business the markets care about.
At least for my group, sales rings the dinner bell announcing a new contract frequently enough that it's driving engineering insane. They need to move that damn thing over by marketing.
Demand Media is a business that was about making money, not creating user value. They were essentially a parasite on the attention economy. It's no shock to me that the chairman of MySpace went on to create another business that turned out problematic.
I can only hope that GoDaddy is next to falter, but it appears to be run by a more cunning set of predators.
http://mediadecoder.blogs.nytimes.com/2012/10/09/in-a-fire-s...
It's called "Three Rules for Making a Company Great."
The first rule is:
1. Better before cheaper
Demand Media severely violated rule number 1. They were all about cheaper before better. Their entire business model seemed to be about producing as much low quality content as possible. No wonder Google wanted to penalize them.
Think about this: If Demand has built their empire on producing super-high-quality articles, they would have had Google as an ally, instead of a threat. Google would have done what it takes to make sure they stuck around. Because Google wants high quality content. Instead, they abused Google's search engine, generating as much content as they could -- with very little focus on quality.
It is fortunate that many companies today are focusing on quality first. The fate of Demand Media is a good lesson for us all.
If we want to build something that lasts, we'll have a much easier time if we're building something that people actually want to stick around.
Who thinks the "content" produced by Demand Media is worth fighting for?
Their investors. Anyone else? I highly doubt it.
http://hbr.org/2013/04/three-rules-for-making-a-company-trul...
Of course, success depends on how you define it.
For example, if you invested $1 in Walmart stock five years ago, and $1 in Family Dollar, guess which investment would give you greater return?
The company that doesn't compete on price. They win. By a lot.
Isn't it odd that in the discount retail market, the company that doesn't compete on price gives investors a better return?
Very odd indeed.
Read the article, in goes into more detail addressing what you brought up.
In addition to what everyone else said, Walmart owns a market other companies don't seem to want: Poor people. Both Costco and Target go after a much richer clientele, and KMart, which is otherwise very similar, is dying. Walmart is the go-to one-stop shopping experience for people working one or more minimum wage jobs.
Related to this is the fact Walmart builds stores where other companies don't. As a result, Walmart owns some very rural markets nobody else is touching.
Edited to add: My point: Given the above, for Walmart, 'cheaper' is a necessary element for success. They're chasing a market that straight-up can't afford 'better'.
Separate point domain parking pages (have much experience here) have fallen greatly over the years. Portfolios of pages used to sell for multiples of future earnings as people didn't realize how mercurial that situation was. Once again your destiny is determined by a few big players who have very little transparency (and in all honesty their own issues with fraud to deal with).
I have seen parked domains that earn perhaps 1/5 to 1/10th of what they did in the last decade. (As one example a domain related to mortgages used to earn perhaps $500 per month back during the boom and now I'd be lucky to get $50).
Not only that but both yahoo and google can ban a domain parked page if they feel there are fraud clicks. You don't get a reason and there is practically no accountability or appeal process.
If you have any interest, you can email me at rohin@priceonomics.com
I am not pleased with all the stuff we have to do with Google+ such as authorship.
So yes, SEO is changing for the better but I don't think anyone believes Google is doing it solely for user experience.
(1) They were built on another business - see Michael Porter's supplier power. If you need one company too much, you face a lot of tail risk. Of course, there's nothing wrong with starting this way. In fact, being focused can be the best way to prove an in idea, get money (revenue or risk capital) and scale to other platforms.
(2) They did not add value. In effect, Demand Media was an arbitrage of digital adspace. Arbitrages get spotted and, eventually, disappear or diminish.
The dependency on another business & the lack of value add makes me wonder how they got as big as they got and just why they did not fail sooner. Of course, I hate to see any companies fail, given the risks of entrepreneurship & positive economic benefits (it makes the economy antifragile).
They (and other content farms) could be crushed by a Wikipedia-like project that fills the same user needs. It's hard to compete with free labor, especially when that free labor uses the lack of time constraint to produce high-quality content.
The main trick is to figure out how they're finding underserved searches, so you can establish a good feedback loop between readers and contributors.
Because that is the only reason to start a company
I didn't see it in the article, but how much did the founders/investors walk away with? If they walked away with a tidy fortune of cash (which I suspect they did), then no: Not an epic fail. An epic win!