Wired on Demand Media

I've covered some of the financial background of Demand Media and its writer mill, Demand Studios, but I'd strong suggest that people also read this article in Wired. It looks at the operational model of the company, which is essentially a virtual factory making money off piecework by writers, videographers, and, soon, photographers.

The process is automatic, random, and endless, a Stirling engine fueled by the world’s unceasing desire to know how to grow avocado trees from pits or how to throw an Atlanta Braves-themed birthday party. It is a database of human needs, and if you haven’t stumbled on a Demand video or article yet, you soon will. By next summer, according to founder and CEO Richard Rosenblatt, Demand will be publishing 1 million items a month, the equivalent of four English-language Wikipedias a year. Demand is already one of the largest suppliers of content to YouTube, where its 170,000 videos make up more than twice the content of CBS, the Associated Press, Al Jazeera English, Universal Music Group, CollegeHumor, and Soulja Boy combined. Demand also posts its material to its network of 45 B-list sites — ranging from eHow and Livestrong.com to the little-known doggy-photo site TheDailyPuppy.com — that manage to pull in more traffic than ESPN, NBC Universal, and Time Warner’s online properties (excluding AOL) put together. To appreciate the impact Demand is poised to have on the Web, imagine a classroom where one kid raises his hand after every question and screams out the answer. He may not be smart or even right, but he makes it difficult to hear anybody else.

The result is a factory stamping out moneymaking content. “I call them the Henry Ford of online video,” says Jordan Hoffner, director of content partnerships at YouTube. Media companies like The Atlanta Journal-Constitution, AOL, and USA Today have either hired Demand or studied its innovations. This year, the privately held Demand is expected to bring in about $200 million in revenue; its most recent round of financing by blue-chip investors valued the company at $1 billion.

Using sophisticated automation, computers decide on the topics and issue story assignments based on what does well in web searches and advertising terms. Equally automated analysis predicts how much revenue in search advertising the piece can bring in. Those that offer enough revenue are given the nod.

It's essentially a service article machine, turning out what might as well be front-of-book pieces at a cheap rate. Will it compete with all writing markets? No, because they can't get the research and work that many who hire writers need. However, does it undercut certain types of content? Absolutely. If you're used to writing quick how-tos or other service-type material, then as things move to the web, you are basically out of business. And can it affect all markets? I suspect it could, as the greatly lowered prices begin to affect perception of value.