Demand Media, profitable and still buying

But CEO Richard Rosenblatt braces for an ad downturn

A reliance on clicks and not display ads has helped Demand Media hold up so far during this downturn.

"The good news is that the ad market has not affected our properties very much yet, and that's because we never really had a strong focus on branded ad sales," said Richard Rosenblatt, co-founder and CEO of Demand Media. "We've mostly monetized through cost-per-click... We haven't seen our CPC or volumes start to drop yet. We are expecting to it at some point."

While Richard does see a challenging year ahead, and he's bracing for it by keeping costs low and focusing on driving organic traffic, he's not letting the downturn stop him from moving forward with acquisitions.

"We're concerned, but we're not going to slow down," said Richard, who is speaking at the Web 2.0 Summit on Friday morning. (Update: Richard's presentation focused on Demand's content-creation machine, called Demand Studios as well as Pluck on Demand. See my interview with Steven Kidd on how Demand Studio's works.)

I caught up with Richard and co-founder Shawn Colo, along with other team members of Demand Media, at their "temporary" headquarters in a suite at The Palace. According to both Richard and Shawn (who heads up the M&A efforts), they will continue to buy companies. That's mostly because the company still has a lot of cash in the bank, and is profitable.

What are they looking for? Shawn said Demand traditionally buys profitable companies. They typically like niche, well-trafficked sites. And, they're looking for technologies or products that can help "exploit" some of their existing categories, such as health, active outdoor lifestyle, and entertainment.