Demand Media, which operates sites such as eHow and Livestrong, has been hit hard by Google's algorithm changes, the company revealed yesterday.
"In February and April, we experienced two major algorithm changes," Demand Media CEO Richard Rosenblatt said during his company's first-quarter earnings call yesterday. "For eHow, here is the impact: as compared to the levels before the first February change, we saw a net decline in search engine referrals of 20 percent."
Google's algorithm update gives less weight in its results to so-called "content farms" that provide low-quality, quick answers to common search terms.
Prior to the update, Demand Media's eHow and Livestrong sites, as well as competitor Answers.com, were placing highly in Google search results.
When Google made the first big change in February, it stated: "This update is designed to reduce rankings for low-quality sites--sites which are low-value add for users, copy content from other websites or sites that are just not very useful."
Though Demand Media said at the time that it was unaffected by the change, it's clear now that it was. And as the company's CEO said yesterday, it's taking the decline in search referral traffic "very seriously."
To address the problem, Rosenblatt said his company has been working diligently over the last several months to remove user-generated content that did not live up to its standards of quality. Demand Media now has "full editorial control over the remaining user articles," he said, and many of those will likely be removed from its sites due to quality issues.
In their place, Demand Media is bringing "feature" content to the service. Rather than share revenue with users who generate content, the company will now pay "feature writers" to craft exclusive, long-form content on the site on a wide range of topics. The company said that the writers will work with its more than 50 editors to deliver content that incorporates "original reporting, exclusive quotes, [and] side bars." The articles will have word counts of at least 850 words.
Demand Media said writers can make up to $350 per story, depending on the topic and the expertise required to write a piece.
Outside of its search engine traffic troubles, Demand Media had a solid first quarter. Its revenue was up 48 percent year over year to $79.5 million. Its page views rose 32 percent year over year to nearly 2.6 billion. That said, the company's losses deepened from $4.1 million in the first quarter of 2010 to $5.6 million last quarter.
Looking ahead, Demand Media expects to generate between $73.5 million and $77.5 million in revenue in the second quarter. It is forecasting a loss from operations of between $600,000 and $2.1 million.
Further reading: Testing Google's Panda algorithm: CNET analysis