The Social IPO Onslaught is About to Commence

The new wave of tech is the Social Mobile Web, and its leading companies are lining up to go public. We haven't seen such a lineup since 1995, when Netscape went out and rang the bell on the dot-com mania. Further back, this happened in 1980 when Apple went out (in an overall poor market climate) and set off the PC bubble. Will lightening strike a third time?

The first out is Demand Media (to be Nasdaq: DMD), run by Richard Rosenblatt, who had been CEO of the parent company to MySpace. DMD is a next generation style content site, which mass-produces sites based on hot keywords. Google search begats synthetic content, designed to rise to the top of search results and skim clicks.  Blogger Paul Kedrosky describes DMD's business as: “find some popular keywords that lead to traffic and transactions, wrap some anodyne and regularly-changing content around the keywords so Google doesn’t kick you out of search results, and watch the dollars roll in.” This modern way to produce content has produced hockey-stick growth, but Google just announced modifications to search results to undermine these synthetic web sites. DMD is highly dependent on search optimization and will quickly modify what it needs to to stay ahead of Google.

How this business dynamic plays out is anyone's guess.

How this IPO dynamic plays out will set a tone for the coming IPO Season. DMD should go out at over a $1B valuation, and be the largest Internet IPO since Google itself. It is supposed to price at the close on Tuesday (tonight) and begin trading Wed. 

On its heel are LinkedIn, Zynga, Groupon and eventually Facebook. LinkedIn is now trading at a $3B valuation. Yes, trading, even though it is not yet public. Markets fill gaps, and a secondary trading market for private shares has evolved for these social IPO candidates. Demand for these shares is hot hot hot, and Facebook ticked to a $70B valuation even as Goldman Sachs did an organized sale of $1.5B at a $50B value. 

You might wonder why they have to subject themselves to Sarbanes-Oxley and other nefarious regulatory schemes when they can raise and trade effortlessly in private markets. Well, the Empire eventually strikes back, and the SEC has put pressure on Facebook to go out as its tradeable shares close in on the 1934 Act limit of 500 shareholders.  

Until the Empire shuts it down, SecondMarket is a great resource. Here is its current hot list, showing which social IPOs should be hot:

Comments

[Account Deleted]

ES Chart
http://niftychartsandpatterns.blogspot.com/2011/01/es-diamond-pattern.html

[da bear]

I am looking into getting into ANTI-social media by revamping my website at wal-streetweak.com.
Anyone interested?

da bear

2011 changes everything.

[da bear]

my Elliott wave analysis (looking at a 3 year DJIA chart) is showing me that a final wave v high is imminent. DJIA just above 12,000 (around 12,200) should mark the top. When the DJIA tops it should also mark a great shorting opportunity in gold and silver.

da bear

[Hank Wernicki]

3:35 pm

Yahoo pops

[Jeff]

"DMD is highly dependent on search optimization and will quickly modify what it needs to to stay ahead of Google."

Hmmm...so what happens when Google downgrades any website that hasn't been in service for more than a year or two with on-topic content? I would place my bet on Google and short Demand Media.

Their business model will work great if you stay "below the radar" but by going public, they are about to move onto Google's radar screen in a big way. I suspect they're giggling over at Google waiting for this one to hit the market...

[yelnick]

jeff, so far the Google response seems tepid: an opt in where readers have to say they feel spammed. How many will comply? Almost all will just click away ... Round One to DMD.

[Eventhorizon]

I notice Demand Media owns eHow and Trails.com. I find these kinds of sites deliver nothing of value. They clutter up search results with poor quality information, yet they always seem to show up near the top. I always got the impression the site was basically a bunch of ads with some poor quality copy attached - now I know why.

Compare Trails.com to SummitPost.org, climbinglife.com or 14ers.com - if you know anything about hiking / climbing / mountaineering you will understand immediately how inferior trails.com is.

A similar test you might like to try is to look up something in which you have some expertise on eHow. You very quickly realise how poor quality the material is and never bother going back - how sustainable is that business model?

Still, given the popularity of pointless products that serve no purpose that I can see (iPad, 3D movies) I have to say I am a terrible judge of what will be successful and what will not.

What I would like Google to do, is allow me to simply filter out those sites.

[Hockthefarm]

Y:

"DMD is a next generation style content site, which mass-produces sites based on hot keywords."

So their prime objective is to make a search function inefficient?

Hopefully they are just a flash in the pan.
Hock

[yelnick]

Event, a lot of folk think of DMD and related synthetic web site creators as second generation of prior domain squattors, and dislike them both.

[Account Deleted]

SPX Analysis after closing
http://niftychartsandpatterns.blogspot.com/2011/01/s-500-analysis-after-closing-bell_26.html

[fade prechter and win again and again and again and again and again and again and again]

Just another day when the thought "EWI is an excellent contrary indicator" comes to mind.

[Glenn Beck]

After extending the Bush Tax cuts, lowering the Estate Tax, lowering the payroll tax rate from 6.2 down to 4.2% - - - Obama now wants to cut the Corporate Tax rate! And here I thought he was a liberal, socialist, communist!

[Account Deleted]

ES Ascending Channel formation
http://niftychartsandpatterns.blogspot.com/2011/01/s-500-futures-before-opening-bell_26.html

[?]

Glenn Beck,

"After extending the Bush Tax cuts, lowering the Estate Tax, lowering the payroll tax rate from 6.2 down to 4.2% - - - Obama now wants to cut the Corporate Tax rate! And here I thought he was a liberal, socialist, communist!"

********

BHO is a politician and is working on 2012 now. He has to move to the center in order for him to have any shot at getting re-elected.

[DG]

BHO is a politician and is working on 2012 now. He has to move to the center in order for him to have any shot at getting re-elected.

Posted by: ? | Wednesday, January 26, 2011 at 08:48 AM

The guy posting these comments about Obama is a superfically-minded dumbass who probably couldn't play chess to save his life. Expecting him to understand something as complex as politics is like expecting a pig to sing opera.

As the saying goes, I only wish stupidity were painful.

[Wave Rust]

yel,
the DMD question is whether they will be the hood ornament or the headstone for the "useless content bubble" that has plagued the internet for decades. Google wants and needs relevant content, even if it is bad and nearly useless. Now they need it even more since the public has come down with "ad blindness" on its search page results. "Ad blindness" is a contagion ,,,, seriously. It's alot like the underwhelming reaction to Oblahblah's sotu ,,,, as America and the rest of the world is turning a deaf ear to his politics of "all speech and no cattle(action)".

DMD is not going to get slapped by Google because of the traffic they generate. They get it about Google. Mediocrity of content is okay with Google, as long as they can keep it coming. In fact, DMD is doing exactly what Google wants, creating content that gets eyeballs. The Google content network is seemingly huge but is actually relatively small in the ad networks biz. And, Google has created this situation for themselves and they are seen as thriving on their dominance in search.

Google is the problem without a 'solution bot' ,,,, yet. They are dominating their corner but they've painted themselves into it, and the paint ain't drying.

You remember when I asked about click-throughs and income generated from your prechter affilate ads. Good times vs. bad times ,,,, that's the very thing that Arianna, "slope" and "alpha" are doing with their aggregating of bloggers for ,,,, ad revenue from eyeballs ,,,, even if nobody clicks on an ad. I'm pretty sure Arianna doesn't pay any of their bloggers. The aggregators all still make money with impression counts and adsense.

You have seen it too, I'm sure, with posts that get backlinks on a temporarily "hot search topic".

The DMD game is a quant's game of SEO combined with speed of indexing for short and long tail keywords that generate clicks with text, images, and video. And, people thought Google was loony for buying YouTube! Ha! DMD knows how to optimize that.

DMD would not want your content, Yel. You're too slow and too rich for their standards! :)) Your content sucks for lack of optimized keywords of hot topics, outside of the narrow sliver of the financially-weighted niches and range of topics you are interested in.

But if you wanted to write about dog training or viagra or self-help or even Oprah ,,,, well, I'm sure DMD might want your 300 words and be glad to pay you $30 pieces of silver. :)

Don't get me wrong, e-commerce of all sorts is still a nascent industry (like the stone age for the internet) that most businesses or industries have yet to really master or understand. But, you know that.

I'm guessing DMD is a hood ornament but never venerable as an institution, but eventually memorialized as a failed model ,,,, unless they adapt to Google slaps and future advanced bots. Or, human bots ,,,, like the thousands employed by goog in India.

that's my 2 cents on DMD.

wave rust

btw, counselor ,,,, if there are squattors, are there squatees? :)

[yelnick]

wave, good commentary. wonder how you reviewed 8-track when it first appeared?

[Cheap Chanel Purses]

This Top 10 franchises for 2011 list is different from most in that I looked at how much money a franchise owner could make as a first priority. Most lists are compiled based on how many franchises a company has opened and while that’s important I don’t think you can pay to send your son or daughter to college with that statistic.