2. This document and any related oral presentation does not constitute an offer or invitation to subscribe for, purchase or otherwise acquire any debt or equity securities of
Demand Media, Inc. (“Demand Media” or the “Company”) and nothing contained herein or in the related oral presentation shall form the basis of any contract or
commitment.
The distribution of this document and any related oral presentation in certain jurisdictions may be restricted by law and persons into whose possession this document or any
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the laws of any such other jurisdiction.
The information contained herein does not constitute investment, legal, accounting, regulatory, taxation or other advice and the information does not take into account your
investment objectives or legal, accounting, regulatory, taxation or financial situation or particular needs. You are solely responsible for forming your own opinions and
conclusions on such matters and the market and for making your own independent assessment of the information. You are solely responsible for seeking independent
professional advice in relation to the information and any action taken on the basis of the information.
This presentation contains certain forward-looking statements. All statements other than statements of historical facts contained in this presentation, including statements
regarding the Company’s future results of operations and financial position, business strategy, plans and objectives for future operations, are forward-looking statements. You
should not rely upon forward-looking statements as guarantees of future performance. The Company has based these forward-looking statements largely on its current
expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy, short-term
and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions
that may cause actual results to differ materially from those contained in any forward-looking statements, including those described under the heading “Risk Factors” in the
Company’s periodic reports filed from time to time with the Securities and Exchange Commission (the “SEC”), which are incorporated herein by reference. Moreover, the
Company operates in a very competitive and rapidly changing environment and new risks emerge from time to time. In light of these risks, uncertainties and assumptions,
the forward-looking statements included in this presentation may not occur and actual results could differ materially and adversely from those anticipated or implied in the
forward-looking statements. Except as required by law, the Company undertakes no obligation to update any forward-looking statements for any reason after the date of this
presentation to conform these statements to actual results or to changes in the Company’s expectations.
The Company is publicly traded on the New York Stock Exchange under the ticker symbol “DMD” and is a registrant under the rules and regulations promulgated by the
SEC. Before evaluating whether you should consider an investment in the Company’s securities, you should read all of the disclosures set forth in the Company’s annual,
quarterly and periodic reports filed with the SEC, including the disclosures under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” The Company’s SEC filings can be found at www.sec.gov and ir.demandmedia.com.
2
Disclaimers
3. 3
We build platforms for
communities of creators to
reach passionate
audiences in large and
growing lifestyle categories
Our Mission
4. Our Portfolio
4
Marketplace Model
55% of total revenue (Q2’16)
$17M GTV in Q2, +34% Y/Y
Blended Take Rate ~76%
Ad Supported Model
45% of total revenue (Q2’16)(1)
51M Average Visitors per Month(2)
Marketplaces Content & Media
(1) Revenue is shown on a pro forma basis net of Cracked and certain other non-strategic properties that were disposed of over the last year
(2) Average monthly unique visitors in the U.S. reached by Demand Media properties in Q2’16 across desktop and mobile (Source: April-June 2016 U.S. comScore)
5. Approximately 46M (1)
Total Unique Monthly Visitors
5
Approximately $19M (3)
Paid to Creators in 2015
Approximately 240,000 (2)
Creators Across Platforms
$106M LTM(4)
Diversified Revenue Mix Clean Balance Sheet Employees
Key Statistics
(1) Average monthly unique visitors in the U.S. reached by Demand Media properties in Q2’16 across desktop and mobile (Source: April-June 2016 U.S. comScore)
(2) Total creators across platforms: number of active creators for Society6, Saatchi Art and StudioD in 2015; based on internal data
(3) Total paid to creators: full year 2015 for Society6, Saatchi Art and StudioD; based on internal data
(4) Revenue is shown on a pro forma basis net of Cracked and certain other non-strategic properties that were disposed of over the last year
$0M
$61M
–
$10M
$20M
$30M
$40M
$50M
$60M
$70M
Debt Cash
446
279
–
100
200
300
400
500
Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16
As of 06/30/16 Scaling the Operation
6. 6
Transformation of Demand Media
2014 – 2016
Rebuilt the
Executive and
Senior Leadership
Team
Invested in an Art
and Design
Marketplace, now
55% of total
company revenue
Restored
LIVESTRONG.COM
to healthy &
growing lifestyle
brand
Significantly
improved content
quality, product and
user experience on
eHow
Rationalized the
portfolio and
focused the
company on fewer
bigger opportunities
Reduced
headcount and
operating expense
while investing in
core businesses for
growth
Strengthened the
balance sheet,
while adding $35
million in cash in
Q2’16 and
maintaining zero
debt
8. 8
Content & Media Ecosystem
(1) Average monthly unique visitors in the U.S. reached by Demand Media properties in Q2’16 across desktop and mobile (Source: April-June 2016 U.S. comScore)
(2) LTM as of 6/30/16. Revenue is shown on a pro forma basis net of Cracked and certain other non-strategic properties that were disposed of over the last year.
(3) Source: comScore June 2016 for ad-supported sites.
• 46m monthly unique visitors(1)
• $48m in LTM revenue(2)
• eHow: Top 6 site in comScore Home Category(3)
• LIVESTRONG.COM: Top 5 site in comScore Health Category(3)
• Monetization and Yield Management Team
• Creator Marketplace
• Technology Platform
Owned & Operated
Properties
Brands
(Sponsored Content)
Content
Channels
• Distribution & Reach
• Data Content Expertise
Content Creation, Audience and Contributor Platform
9. 9
eHow
(1) Source: Across desktop and mobile (US comScore Apr.-Jun. 2016)
(2) Source: YouTube & Facebook (Apr.-Jun. 2016)
Multi-Year Transformation Commences in 2H’2014
• Removal of 2.4m low quality/duplicative titles between Q3’14
and Q2’15
• Removal of 3 ads per page in Q1’15; one additional ad unit
removed Q2’15
• New site team leadership (GM, product, content)
• Category rationalization
Product
• New responsive homepage design and site wide header to
optimize mobile web experience
• Public facing contributor and user profiles
• Growing social audience and distribution channels (Pinterest,
Facebook)
Key Metrics
• 18m average monthly unique users(1)
• ~39m monthly average video streams (2)
• Management estimates that proactive transformation efforts
resulted in a revenue decline of ~$40m in FY15
10. 10
LIVESTRONG.COM
Transformation Facts
• 300k articles removed since Q4’14
• Reduced ad density: 3 Ads removed from every page
(2014)
Product
• Redesigned home page; new and improved legacy content
more easily shareable
• New native mobile ad unit
• Header bidding live on desktop platform
Key Metrics
• Nearly 21m average monthly unique users (1)
• Significant mobile audience growth +31% Y/Y (Q2’16) (2)
• 5m total app downloads with over 300k monthly active
users (3)
• Over 5m average monthly video streams in Q2’16 (4)
(1) Source: Across desktop and mobile (US comScore Apr.-Jun. 2016)
(2) Source: Demand Media Internal Data
(3) Source: Demand Media Internal Data; App downloads over the life of the app; monthly active users in June 2016
(4) Source: YouTube & Facebook (Apr.-Jun. 2016)
11. 11
LIVESTRONG.COM Site Redesign
FEBRUARY 2016
Helping You Live STRONG
New Nav Site Wide
NOVEMBER 2016
Out With the Old!
Lose Weight and Keep It Off
JUNE 2016
Continuing to improve on Site
Nav with trending articles
12. 12
StudioD: Branded Content Production
studioD
• Specialized team focused on telling branded stories for
ownership or distribution across our audiences
• Leverages insights data, content formats and production
process to build award winning content programs for brands
and advertisers
Content Channels
• 31 live hosted channels with top brands and publishers fully
managed by DMD
• ~500,000 articles
• Ad-Supported Business Model
13. 13
Mobile Evolution
Source: Demand Media internal data
Mobile visits as a percentage of total visits
Video Views
(in millions)
116.6
15.5
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16
eHow LIVESTRONG.COM
+12% Y/Y
Source: Demand Media internal data, YouTube and Facebook
37%
42% 42%
40% 41%
46%
55%
59% 60% 60%
63%
67%
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16
eHow LIVESTRONG.COM
14. $0.00
$5.00
$10.00
$15.00
$20.00
$25.00
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16
-2% Q/Q
–
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16
+12% Y/Y
14
Content & Media Key Metrics
Revenue Per Visit(2)
Video Views (m)(4)
Revenue ($m)(1)
Visits (m)(3)
$0
$5
$10
$15
$20
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16
-7% Q/Q
(1) Revenue is shown on a pro forma basis net of Cracked and other non-strategic properties that were disposed of over the last year.
(2) Based on internal data. Revenue Per Visit is defined as Content & Media revenue per one thousand visits. Revenue per visit is shown on a pro forma basis net of Cracked and certain other non-strategic properties that were disposed of over the last year.
(3) Based on internal data. Visits are defined as the total number of times users access the company’s content across (a) one of its owned and operated online properties and/or (b) one of its customers’ online properties, to the extent that the visited customer web pages are
hosted by the company’s content services. In each case, breaks of access of at least 30 minutes constitute a unique visit. Visits are shown on a pro forma basis net of Cracked and certain other non-strategic properties that were disposed of over the last year.
(4) Source: YouTube, Facebook and internal data.
352
277
0
200
400
600
800
1,000
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16
Desktop Mobile
-6% Q/Q
630
16. 16
Society6
Marketplace platform empowering artists to make their designs
available for sale on a variety of products.
Business Model
• Original designs from a global community of over 200k artists
• Over 2.8m original designs
• Print-on-demand for 32 products
• Third-party vendors produce, pack and ship directly to
customers
• Artist earns a royalty on every product sold
Key Metrics
• 131k new customers / 190k total customers in Q2’16
• Visits up 15% Y/Y; transactions up 18% Y/Y in Q2’16
• Over 600k social followers (1)
• Over $12m in total transaction value in Q2’16, up 25% Y/Y
Source: Figures based on internal data.
(1) Source:, Facebook, Instagram, and Pinterest
17. 17
Saatchi Art
A leading online art gallery, redefining the experience of
buying and selling art by making it easy, convenient and
welcoming for both collectors and artists.
Business Model
• Original art from a global community of over 60k artists
• Commission based model; artist earns 70%
• Best in class logistics management (packaging, shipping,
customs, delivery)
• Over $1.5b in total retail value of art available on the site
based on list price of artworks as of June 2016
• Over 500k artworks for sale
• Have shipped to ~80 countries
• Unique Art Advisory program led by Chief Curator, Rebecca
Wilson
Key Metrics
• $4.5m in gross transaction value (Q2’16)
• Average order value ~$1,300 (Q2’16)
• 64% Y/Y revenue growth (Q2’16)
Source: Figures based on internal data.
18. 18
Marketplace Key Metrics
Revenue ($m) Revenue Per Transaction(1)
Total Transactions(2)
$0
$5
$10
$15
$20
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16
+28% Y/Y
0
50
100
150
200
250
300
350
400
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16
+19% Y/Y
$0.00
$15.00
$30.00
$45.00
$60.00
$75.00
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16
+7% Y/Y
Marketplaces Revenue as a Percent of Total Revenue(3)
55%
–
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16
(1) Average revenue per transaction is calculated by dividing Marketplaces revenue for a period by the number of transactions in that period
(2) Number of transactions is defined as the total number of successfully completed Marketplaces transactions during the applicable period
(3) Total Revenue is on a pro forma basis net of Cracked and other non-strategic properties that were disposed of over the last year
20. 20
Quarterly Revenue Composition (Pro Forma)
$18.5
$15.5
$12.5 $13.2
$11.7
$10.8$10.7 $10.5
$12.6
$18.3
$13.5 $13.4
Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16
Content & Media Marketplaces
(1)
(in millions)
Y/Y (43%) 59% (48%) 59% (56%) 63% (45%) 28% (37%) 26% (30%) 28%
Q/Q (22%) (25%) (16%) (2%) (20%) 20% 5% 45% (11%) (27%) (7%) (0%)
(1) Revenue is shown on a pro forma basis net of Cracked and certain other non-strategic properties were disposed of over the last year
21. 21
Cost Breakdown
$20
$22
$24
$26
$28
Q2'15 Q3'15 Q4'15 Q1'16 Q2'16
-14% Y/Y
Total Non-GAAP Expenses Excl. Product Costs
(in millions)
~$4m
savings
per qtr
Cost Breakout By Type
32%
24%
21% 37%
48%
39%
0%
25%
50%
75%
100%
Q2'15 Q2'16
Direct Business Costs Variable Costs Corporate Overhead
% of Total
Costs
% of Total
Costs
22. Assets Liabilities
Cash & Cash Equivalents $ 60.9
Accounts Payable, Accrued Expenses,
and Other Current Liabilities
$ 14.5
Other Current Assets 10.7 Deferred Revenue 2.5
Property and Equipment, Net 12.0 Non-current Liabilities 1.7
Other Long Term Assets(1) 30.5 Stockholders’ Equity 95.4
Total Assets $ 114.1
Total Liabilities and Stockholders’
Equity
$ 114.1
22
Balance Sheet Summary
(in millions)
As of June 30, 2016
(1) Includes intangible assets, net, goodwill and other assets.
23. 23
Cracked Transaction
• Buyer The E.W. Scripps Company
• Closing Date April 12, 2016
• Cash Purchase Price $39m (37% of DMD
market cap at close)
• Holdback 10% ($3.9m) held in
escrow for 15 months
• 2015 Revenue $10.9m (9% of total DMD
revenue)
• 2015 Revenue Multiple 3.6x
• 2015 Op Profit Multiple 12.7x
• DMD’s Purchase Price for
Cracked Assets (2007) ~$1m
24. 24
Selected Recent Valuation Comparables for DMD Businesses
Art and Design
Marketplace
Content and Media
ASX Mkt Cap $170M
(USD) on ~$85M
(USD) FY 2016 revenue
Time Warner Invests $50m at a
$300m valuation
2016 Revenue estimated $100m
NBCU invests $200m
$1.5 billion valuation
2016 Revenue estimated $250m
Content and Media
25. 25
Executive Leadership
Rachel Glaser
Chief Financial Officer
Sean Moriarty
Chief Executive Officer
Prior:
• CEO at Saatchi Art
• President, CEO, EVP, Tech and COO of
Ticketmaster
• EVP, Technology at Citysearch
Brian Pike
Chief Operating Officer & Chief
Technology Officer
Daniel Weinrot
EVP, Legal & General Counsel
Prior:
• CFO at Move, Inc
• Senior VP, Finance at Yahoo!
• VP, Walt Disney Company
Prior:
• CTO at Rubicon Project
• CTO at Ticketmaster
Prior:
• VP & Deputy General Counsel at Las
Vegas Sands Corp.
• Corporate associate at Latham &
Watkins LLP
Tawn Albright
EVP, Corporate Development
Prior:
• CEO and founding partner at
Rockhouse Partners
• Executive VP for Etix
Jill Angel
EVP, People
Prior:
• VP Operations at Saatchi Art
• Team leader at Cocodot, Swirl by
DailyCandy, and GSI Commerce
Dion Camp Sanders
EVP, Marketplaces
Prior:
• Vice President, Emerging Businesses
within the Labs Group at Disney
• Founder and CEO of Pacific Edison
26. 26
Investment Thesis
• Strong and experienced management team with significant breadth and depth of operating and
marketplace businesses.
• Marketplace business represents over 50% of total revenue. Revenue growing over 25% year-
over-year, Gross Transaction Value growing 34% year over year*
• Transforming Content & Media business with strong well-known brands. Significantly improved
products and content. Growing social reach with 1.6 million combined followers on Facebook
and Pinterest*
• Reduced operating costs by over $18 million per year on a run rate basis. Corporate overhead
provides significant operating leverage going forward.
• More focused portfolio with sale of Cracked in Q2 and divestitures of other non-core properties
• Sum of the Parts analysis points to significant value dislocation.
• Clean balance sheet with ~$60 million cash and no debt (Q2’16).