Editor’s Note: This post was originally published on Seattle 2.0, and imported to GeekWire as part of our acquisition of Seattle 2.0 and its archival content. For more background, see this post.

By David Aronchick

Content farms are insanely hot right now, no matter what the chattering classes would prefer. These companies, who churn out large bodies of low cost and low quality content in order to win search results, have completely overwhelmed the professional content producers in the search engine result game. Yet, despite all the hatred, these same journalists cannot seem to coverthemenough. The biggest question is, are we truly on the verge of a new content world that will kill the market for quality content? And, more importantly, do you have any chance of rising about the low quality noise?

The filings for the Demand Media IPO gives us a particularly interesting look inside the business of this new class of content creators. Here are some choice nuggets:

  • First, like any new business, Demand definitely talks a big game. A nice analysis of past statements by the CEO, Richard Rosenblatt (written by Scott Austin, professional journalist) shows the business is not throwing off as much cash as every one thinks.
  • Second, the costs are far more centralized in content creation; Demands shows over $200 M in expenses in 2009. Though they do not break it out in detail, one must expect that a significant portion of this goes to paying the content creators – a huge chunk that they have to deal with. One must deduce that the breadth of the content created is not that valuable and/or they are still paying way too much to get it created. Either way, Demand will have to change this equation if the content farm business is going to be their long term bet.
  • Third, 44% of revenues come from the domain name business, eNom, versus any of the content world. eNom is a domain parking and registration site and, while they tend to be more ethical than most, it is still a very gray area. Because the costs from that side of the business are likely to be much much smaller, it further stresses how unprofitable the content generation arm of the business is.
  • But finally, and most importantly, there should be a huge banner on top of page one that stresses an enormous point: Demand Media lives and dies based entirely on what Google does. A very thorough review by Danny Sullivan, of SearchEngineLand (and professional journalist) shows that not only does Google send more than 26% of their overall traffic, but Google Ads (and presumably the Google Ad Exchange) delivers more than 26% of their revenue.

Demand has done some amazing things, but this last point is absolutely terrifying. Like my friend says – “It’s a great business until it isn’t.” And, with such a huge dependence on a single external company like this, the difference between a great business and zero business is razor thin.

I think there will always be room for this kind of company; there is far too much demand for very specific answers that professional content creators will never completely satisfy. But will this always be the black hole of search queries, gathering all the miscellaneous terms together? That is to say, is quality content in jeopardy? The simple answer is no – users are simply not satisfied with what they are finding, and the numbers show this in detail. At less than two pages per visit, and virtually no social profile at all, users are clearly looking for something more.

So how can you compete with companies that fund armies of people eating ever search query that they can find? Just play into the area that they are the weakest. Users are desperate to find quality content that they connect with, and that is where content farms fail. At Entertonement, our content is shared constantly across all the major social media sites, and, every time it is, we never fail to rank number one for the result; you can do the exact same thing. Play up your most unique and highest quality content, and your users will respond by taking your content to their networks. Just a few wins with your customers and you’ll be miles ahead of the content farms, who have never and will never be able to connect in that way. Yes, they will still own the most random long tail terms, but the more viral your content, the more you have a chance to reach the people who are interested in you. You will not win the search results game going head-to-head until Google cleans up the results, and in the meantime, the only winning move is not to play.

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