Q&A with Demand Media co-founder Shawn Colo

Shawn Colo dishes on Demand's content strategy, its M&A forecast, and how it's responding to Panda

Vator Splash LA is coming up next week, and to get ready for it, I struck up a chat with one of our keynote speakers, Demand Media co-founder and EVP of M&A Shawn Colo.

Demand Media has seen some huge changes in the last few months--it's gone public, it's partnered with several celebrities and launched new channels and websites, and it has seen a 48% rise in revenues in the first quarter of 2011 compared to last year. But there has also been some bad weather. Google's tweaked algorithm, Panda, gave Demand's eHow property a run for its money. So Shawn and I chatted about what Demand is up to these days. 

(Note: If you want to take advantage of tickets to Splash LA before prices go up next week, go here and use: Vator15 for a 15% discount off today's prices.)

Demand has been bringing on a lot of new celebrity faces—Rachael Ray, Tyra Banks—what’s the content strategy here?

What we’re doing here is pretty consisitent. We’re producing really high quality content that the users want to consume. What you’re seeing is that as our platforms evolve, they become more flexible in the types of content they can deliver. In the past, shorter form content was common, today, it’s different kinds of content. The celebrity stuff adds a new dimension to the different types of things we do every day. It brings in users through Facebook and Twitter and allows them to consume different types of content. And advertisers are also very interested in celebrity content.

Is Demand bringing on any new partners? Brands, perhaps?

 Our core focus is the consumer. The consumer will look for high quality information in a number of different places. Our brand and ad sales team continues to grow. Really we’re excited about the rate of growth and the types of people we’re adding to our brand and ad sales capability. We’re marrying brands and who they’re trying to reach with our audience and product.

I know Demand recently acquired Coveritlive; can you tell me more about Demand’s content strategy from an M&A perspective?

We are a media and technology company. It’s important for a successful media company to be both. Our M&A strategy will be a blend of product and engineering talent and hardcore data and analytics, as well as valuable user bases and traffic sources.

What kinds of companies is Demand looking to acquire?

When we talk to analysts and Wall Street, we highlight our core focuses: social, video, mobile, and international. Companies that help us accelerate those core focuses are the companies we’re looking to acquire.

How much of this is in response to Panda and how much was part of Demand’s original strategy?

You can’t turn on a dime and execute a content strategy based on one change in an algorithm. Our content strategy has been in place long before Google released Panda. Those seeds were planted years ago. We respond to what consumers want.

Does Demand have a strategy in place to sort of move away from Google’s page-rank algorithm in light of Google's Panda?

Any good business has the ability to change as products and technology and consumer needs change. What we’re doing is building a diversified media and technology company and we’re going to exploit new markets as they develop, and we’re going to develop new platforms.

Has Demand discontinued the writer compensation program across the board, or just for eHow?

Only eHow. In the early days of the company, there were a lot of passionate users creating content and we learned a lot from that experience, and that led to the creation of Demand studios. In order to have the platform work the way we wanted it to we had to build some controls into the system so it wouldn’t be a manual publishing platform.

What’s the outlook for the media landscape right now?

I think the media landscape is great. Media consumption continues to go up, and it’s shifting in how it's being consumed. It’s a huge market—global ad spend is $100 billion, and it’s not a winner take all market. You’re going to see a lot of successful companies popping up in the media market.

What do you think is in store for the user-generated content industry?

I think like anything it will continue to have its place, and it is a good model…but it depends on how you’re defining it. Is it a ratings model, wiki model, or is it an anyone-can-publish user generated model? Each one has a different answer.

How is Demand utilizing social media to get its content out there and seen?

A great example is Cracked.com, which has an audience of 1.5 million Facebook fans, and we’re starting to drive more traffic to that user base. Getting the fans depends on how strong the brand is and how strong the content is.

Let’s switch gears a little bit and talk more about your history with Demand. Where did the idea for Demand come from and how did it get started?

I was in the private equity business, I did that for about ten years, and the original concept for Demand sprung out of project I was working on…that was back in 2005. I was looking for a company to invest in. I was looking for content media business I could back and there was nothing out there that resembled what I was looking for.  The premise was: Can we build this new digital media company that can scale across verticals and geographies, and leverage the internet to do things more efficiently? We ended up creating this platform and eHow and eNom were the first two acquisitions.

 How do you and Richard Rosenblatt work together?

I’ve always been focused on finance and M&A side of business, and Richard has always been much more product-oriented. The rest of the founding team is still here, which is a pretty strong statement I think. I think it’s a pretty good balance…Richard is definitely forward-thinking and trying to push the envelope. He’s really thinking about setting goals and objectives for the company—he’s a great leader and great CEO. I tend to be more risk averse, I think through the structural side of things, such as valuation.  

Demand Media has faced a lot of criticism in the past for its content creation model—do you think that’s fair?

I guess what I would say to that is we have 650 or so full-time employees. We have mix of full-time editorial people. It takes a lot of effort and skill and a lot of capital to create the diversified media business that we’ve created, and people are just starting to understand what it takes to create a business like this. What we’re most focused on is the consumer. We do a lot of consumer surveys and a lot of testing. I rarely hear people say they don’t like our websites. Models continually emerge and are unsold. I guess I would say I appreciate and respect people’s opinions, it’s helped drive the company forward.

 Demand is an interesting company in that it has a number of different things going on—it produces content from sites like eHow, but there’s also another side of Demand that handles domain name registration. Do you consider Demand to be more of a content site or more of a domain site?

We’re a media technology company, so it’s nice to have diversity in revenue streams…it’s nice to have a subscription revenue stream. There’s a lot of profitability in that. We also think there are a number of interesting levers to promote and distribute content from that platform. There are a number of overlaps between content and domains, and that’s how we’ve been able to wrap both of those into one company.

 What’s next for demand?

More innovation. We have a real history of innovation in the last five years. We want to focus on our core areas—social, mobile, video—but do it in a way that’s different, innovative, and new.