

How a near-worthless magazine beats Demand Media - mchafkin
http://www.inc.com/max-chafkin/demand-medias-curious-ipo-.html

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btilly
Sight unseen I'm betting that the difference between the two sets of numbers
from Demand Media is based on a belief that they have generated a lot of
recurring revenue that GAAP doesn't let them fully account for. The idea is
that they build some content out, pay for it now, then keep on getting paid
for it over time. Newsweek doesn't have this structure.

If you agree with Demand Media on this, you are likely to think that they are
a good investment. If you disagree with them on this, or you think there are
significant risks that search engines will decide as a whole (as, say, Duck
Duck Go has) to destroy their business model by discounting their crappy
content, then you'll think they are a bad investment.

As for Newsweek, they have structural problems that mirror the broader media
industry. I wish them luck, but they don't have a plausible story for why
current losses are likely to turn into future profits. Hence their low
valuation.

