Demand Studios in Financial Trouble? New Email Hints at New Round of Writer Firings and EHow's Demise

As a former writer at Demand Studios (I stopped writing for them as, for $15 an article, I didn't feel like being treated like garbage), I received an e-mail today from Demand Media which, if you read between the lines, tells any writer still writing for them that one of their biggest websites, eHow, is a done deal.

According to Demand Media's e-mail, in the future they will have few standard article assignments for eHow and instead are moving towards more "slide shows, video series and feature articles". As most writers at Demand Studios count on the standard eHow articles to pay bills and keep a roof over their heads, this news has writers all over the internet panicking. It is also a sign Demand Studios can't afford to keep paying for the $15 a pop eHow articles, now the site has been downgraded by Google and its 'Panda' algorithms. The e-mail, no matter how 'positive' Demand tries to sound in it, also points to a company in serious financial trouble.

Once the darling of the media, who heralded its initial IPO offering in January at $17 a share, in just a few short months Demand Studios is now being lambasted by tech blogs and financial experts as a company on its way down and, possibly, eventually.......out. In fact, so bad is it, Barclays Capital (BCS) set an "overweight" rating of Demand Studios stock last month, with a price target of only $11. They're not recommending you buy the stock.

In the last nine months, Demand has been hit badly by Google's 'Panda', which downrated all poor quality content farms (and Demand is right up there with the 'best' of them), it has done two rounds of writer firings and, with this latest news, more are likely on the horizon, and has seen its stock plummet to yesterday's price of $6.76. Anyone who bought into Demand at $17 a share, and kept the stock, is now looking at a huge loss, with some industry analysts even saying they expect Demand (DMD) to eventually be trading as a 'penny stock'.

To many people who have written for Demand Studios or who have followed this company closely, none of this latest news however, nor the new e-mail, is remotely surprising.

In its five year history, regardless that its public relations machine will tell you otherwise, Demand Studios has never turned a profit. Instead it mainly relies on large investments from people who are convinced it will eventually become a gold mine, and that money is what keeps Demand able to pay its writers and keeps the company afloat. Funny about the 'gold mine' though. It still isn't one yet, not unless you count the ones where all the mine shafts are closed up and all the miners get sent home.

Even the Securities and Exchange Commission suspects Demand Media is in trouble, and knows how little anyone should believe its public relations about being a "billion dollar company". After all, when the initial IPO was first to be filed, the SEC started an investigation into Demand Media for its shady accounting practices. It eventually allowed Demand's IPO pricing to go ahead (and, for that, you have to ask what's wrong with the SEC?) but still with reservations.

So, as Demand Studios writers once again get the shaft (see that 'gold mine' image keeps resurfacing, but always in the wrong way, of course), from what I believe is the worst content farm on the internet, Demand itself will continue to try to convince the writers it has left that its latest cutting of eHow topics and new direction will be "putting additional focus on helping you grow within your fields". And if you believe that, I have a mine.......well, you know how that one goes.

Luckily, the smart writers, who are already all over Demand Studios forums posting what they really think about the company, know what the real truth behind this e-mail is. Demand is in trouble. Demand knows it. The writers know it. And, by now, their poor investors, who have already lost millions and will probably lose millions more, know it.

As for me, as much as I hate to kick someone (or something) when they're down, I must admit I'm happily reading the news about Demand as it keeps coming in, and looking forward to more.

Sure, many Demand writers will suffer because of this and, in today's terrible economy, that's sad, but if it gives them the wake up call they need, and makes them realize they shouldn't be working for companies that treat them like garbage, then in the long run, it's for the general good.

Besides, as harsh as it might sound, if these soon-to-be former Demand Media writers get off their patoots, and start looking for work, there's still plenty out there and with companies that don't treat their writers like second-class citizens. Demand Media, meanwhile, deserves exactly what it gets.

More Information:
Barclays Capital Analysts Begin Coverage on Demand Media - Localized USA
Google Traffic to Demand Media Sites Down 40% - Forbes.com
Congratulations Demand Media, You're Still Pretty Dumb - Forbes.com