You probably heard all the hoo-ha a few weeks ago about Demand Media’s (DMD) IPO. While the company has a technically impressive operation, it just might be built upon quicksand. And if you bought the stock of the company that brought us the “How to Pour a Glass of Water” page, then you just might find yourself under water soon.
“Instructions: Turn on a kitchen or bathroom faucet if you wish to drink tap water. Usually you may choose from two different temperatures of water: hot or cold.”
That quote is not a joke. That’s what Demand Media does. If you don’t know why a company would create a page explaining how to pour water, see if you can figure it out before I give you the answer below.
Initially, Demand Media dodged Google’s content-farm crackdown bullet. But now it seems that Google has reloaded with a heat-seeking missile. See the chart here.
Google’s “Panda” algorithm update is mauling content-farms like Demand’s eHow.com. And not only that, Google is encouraging the masses to rat them out. If you use Google’s Chrome browser, you can install their Personal Blocklist plugin. With one click, you can make all the eHow pages go away. And Google watches who you vote off the island. If you don’t like it, Google probably doesn’t like it either.
I don’t know if Demand Media will survive or not. What I do know is that Google will fight tooth-and-claw to protect its SERPs (search engine result pages) because that is their content. Anybody who thinks they can game the system on a sustained basis is living in a dream world.
And even if the army of idiots which is flooding the world with “how to drink water” pages were to ultimately succeed, and overrun Google, they would still perish because everybody would quit using search engines to find things.
There are laws against email spam. There are laws against idiots calling you on the phone all day. Will there one day be a law against web spam? I don’t know, but it might be the only way to save search engines in the long run.
If you are a stock-picker who does fundamental analysis, you now have another metric to evaluate: how much of the company’s revenue is derived from black-hat SEO? Because it is only a matter of time before Google comes for them.
The reason why eHow wrote a “how to pour water” page was to attract bottled-water ads from Google AdSense. Look down at the bottom of that page and you will see them, assuming that you are not running AdBlock. Profit margins on water products are high, and I wouldn’t be surprised if those advertisers are spending a lot on those ads. eHow gets paid every time somebody clicks on one. OK, the page may not attract a lot of traffic, but the whole point of a content farm is to make a million such pages so that the revenue ads up to something substantial.
And that is indeed clever. But not from Google’s perspective. In fact, when Google sees a page like that, smoke starts to come out of its ears as it reaches for the laser canon. Google always talks about their algorithms, and how an impartial robot is trying to build the best SERPs. But I guarantee you that in addition to that, the actual people at Google take it very personally.
Any algorithm can be gamed if you know how it works. When a company like Demand Media games the algos, it is a direct threat to Google’s bread and butter. Google will crush them because it has no choice.
Personally, I wouldn’t hold the stock of a company like Demand Media if you put a gun to my head. And I wouldn’t be the least bit surprised if it went to zero, never having turned a profit. No doubt they are very smart people, and they may figure out a way to survive. But Google only wants to list links to quality content, and if Demand has to spend more money to bring up its quality, that would certainly eat into any future profits.