Demand Media, Inc. Files IPO: eHow.com and eNom.com soon to be Publicly Traded

Demand Media, Inc., the holding company behind eHow.com and eNom.com filed for an IPO on August 6,2010 with the SEC. It looks like Demand Media, Inc. wants to share its losses with the public.

The company derives about 35% of its revenue by displaying Google ads on its own web sites, like ehow.com and on third party websites for which they deliver content. While the company was able in the past to generate significant revenue, they never managed to produce content in a profitable way, at that is how it looks like based on the data filed with the SEC.

Another large source of revenue is their domain registrar enom.com. This is a high competition market with new players entering the game on a regular basis. Enom caters to domain resellers and high volume domain buyers.

Based on the data from their SEC filing, it was not immediately determinable, where they were losing money. Revenue and expense spreadsheets were given with different time frames. For example revenue was given based on the year, while cost figures were only broken down by showing six months ended June 30.

As Erik Sherman from bnet.com sees it:

"And as with Demand Media’s IPO filing, there are plenty of pro forma numbers, which are essentially explanations of why you shouldn’t pay attention to what normal accounting would tell you."

While both main areas of business can be very profitable Demand Media has not shown that they can operate these areas profitable. And this is not a consequence of too little volume. It will be interesting whether and how this will be accepted. The main question is: will this IPO attract smart money or dumb money.