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DISCLAIMER: THE MATERIAL SET FORTH IN THIS PRESENTATION CONTAINS FORWARD-LOOKING STATEMENTS
This presentation contains certain forward-looking statements. All statements other than statements of historical facts contained in
this presentation, including statements regarding Demand Media, Inc.’s (“Demand Media” or the “Company”) future results of
operations and financial position, business strategy, plans and objectives for future operations, are forward-looking
statements. 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, including those described under the heading “Risk Factors” in the Company’s
periodic reports filed 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. New risks emerge from
time to time. It is not possible for Company management to predict all risks, nor can the Company assess the impact of all factors
on its business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements the Company may make. In light of these risks, uncertainties and assumptions, the
forward-looking events and circumstances discussed in this presentation may not occur and actual results could differ materially
and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events or results. Although the Company believes
that the expectations reflected in such forward-looking statements are reasonable, the Company cannot guarantee that the future
results, execution of its business strategy, including its proposed business separation, as well as short term and long-term
business operations, plans and objectives, levels of activity, performance or events and circumstances reflected in the forward-
looking statements will be achieved or occur. Moreover, neither the Company nor any other person assumes responsibility for the
accuracy and completeness of such forward-looking statements. Except as required by law, the Company undertakes no
obligation to update publicly 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 the Company’s annual, quarterly and period reports filed with the SEC, including all of the disclosures
set forth therein, including 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.
May 2013 Investor Presentation
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5
intent-based content that we know users want
CREATE
qualified intenders and brands through
unique opportunities to engage
DISTRIBUTE
through multiple platforms and
content formats
MONETIZE
May 2013 Investor Presentation
to billions of signals of people’s intentions
LISTEN
•
•
•
How to Cook a Whole Chicken
Benefits of Almond Oil
How to Open a Bottle of Wine Without a Corkscrew
How to Get Kool-Aid Out of a White Carpet
VIDEO: How to Make a Nicoise Salad
8
Foundational Content:
• How-To Articles
• How-To Videos
• Informative Articles
Feature Content:
• Feature Articles
• Feature Video
Series
• Slideshows
• Blog Content
Informative Articles Slideshows
Premium Video Series
How-To Video Series
Feature Articles How-To Articles
Mobile Slide Step
Blog Content
May 2013 Investor Presentation
9
Diversified Distribution(3)
More than 126M(1) WW Unique Visitors in March 2013
Growing Audience(2)
(1) comScore
(2) Internal Company Data
(3) Based on New Content Production May 2013 Investor Presentation
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
Mar-10 Mar-11 Mar-12 Mar-13
DM O&O PVs
O&O Network
Q1 2013
O&O Network
Q1 2012
Mills
Mar-13
10
Demand Media comScore Category Rank1
Home &
Garden
Personal
Finance Health Pets
Technology
News
2008 NM NM #32 NM #28
2009 #1 #8 #15 #12 #9
2010 #1 #3 #3 #6 #8
2011 #1 #2 #3 #3 #6
Today(2) #1 #2 #3 #4 #6
Current
Uniques 16MM 10MM 25MM 3MM 13MM
#38 2008
#12 Apr‘13
Demand Media
comScore Rank1
(1) US data only
(2) April 2013
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Advertising strategy optimized to
leverage Demand Media’s
INTENT-DRIVEN AUDIENCE:
Direct sales of customized and high
share-of-voice advertising experiences
Network sales of quality standard
inventory on desktop and mobile
devices
Contextually relevant, “cost per click”
units optimized in partnership with
Google AdSense team
Total Ad Revenue
Direct Display
Network Display
Performance
Advertising Stack
May 2013 Investor Presentation
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Content Partners
Mobile
International
Commerce
• Subscription
• On-Demand
• Expert Advice
• Over 200M page
views
• More than 50M visits
• Strong Social
Engagement • Mobile 10% of 1Q13 C&M
Revenue
• Additive to desktop
• 370% PV growth YoY
• High IRRs
• New channels
launching each Q
New Content
• Plan to double spend in 2013
• Attractive IRRs
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+20% Crafts
ProprietaryAlgorithms
& Technology
Expert-Driven
Creation Platform
Massive Audience
Reach
Targeted
Discovery
14
Diverse
Monetization
Capabilities
May 2013 Investor Presentation
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16
#2 registrar worldwide
Over 15M domain names under management(1)
#1 wholesale registrar worldwide
Recurring revenue, subscription-based service business
(1) Includes approximately 1.5 million domains from the acquisition of Name.com in December 2012
May 2013 Investor Presentation
17 May 2013 Investor Presentation
Extensive Distribution Value Added Services After Market Services
B2B
B2C
Whois Privacy
Email Services
Website Creator Tools
SSL Certificates
Shared Hosting
Solutions
Domain Auctions
Domain Marketplace
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INCREASED
CUSTOMER
CHOICE
BETTER
BRANDING IMPROVED
DISCOVERY
NEW gTLDs to DRIVE INDUSTRY GROWTH:
May 2013 Investor Presentation
corporatelawyerinsanfrancisco.net
For example:
Corporate.attorney
19 May 2013 Investor Presentation
20%
Crafts
DMD’s HIGHER MARGIN REVENUE STREAMS:
BACK-END
REGISTRY
SERVICES
INCREASED
VOLUME
FOR
REGISTRAR
REGISTRY
.dance
.rehab .ninja
.engineer
REGISTRY REGISTRAR
DISTRIBUTION
REGISTRY
SERVICES
AFTERMARKET
.dance .ninja
.engineer .rehab
.pub .social
…
May 2013 Investor Presentation 20
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Board has authorized plan to explore the separation of our business into
two publicly traded companies:
A LEADING DIGITAL MEDIA COMPANY with a powerful
outsourced content creation platform that organically grows its
audience, leading web properties that reach over 126 million(2)
monthly unique visitors, and an integrated monetization platform
that incorporates branded, network and mobile revenue streams;
and
A LEADING END-TO-END DOMAIN SERVICES
COMPANY offering registry services, expansive wholesale and
retail distribution, and comprehensive aftermarket services.
(1) This transaction is subject to a number of conditions, including final approval of the transaction by Demand Media’s board, favorable tax rulings and
opinions regarding the tax-free nature of the transaction to Demand Media and to its stockholders, further due diligence as appropriate, and the
effectiveness of required filings with the Securities and Exchange Commission (“SEC”). There can be no assurance that the separation of Demand Media’s
business into separate companies as previously disclosed will occur.
(2) comScore WW March 2013
May 2013 Investor Presentation
23
o
o
24 May 2013 Investor Presentation
Re
ve
nu
e
Time
Strong “Same Store” Growth
Rev
en
ue
Time
25 May 2013 Investor Presentation
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(1) Direct Margin reflects variable costs to ICANN and registry fees only.
May 2013 Investor Presentation
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
.COM .NINJA
Direct Margin(1)
~20%
~90%
$-
$50
$100
$150
$200
$250
$300
$350
$400
2010 2011 2012
Registrar Revenue Content and Media Revenue ex-TAC
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
Q1 12 Q1 13
Registrar Revenue Content & Media ex-TAC
(1) Revenue ex-TAC. This non-GAAP financial measure is described and reconciled to its comparable GAAP measure in the accompanying tables available in
the Appendix to this presentation as well as the Supplemental Data Schedule within the Quarterly and Annual Results tab of the investor relations section of
the Company’s website at ir.demandmedia.com. 27
$100
$134
$241
$312
$361
+28% yoy
+30% yoy
+16% yoy
$141
$119
$193
$227
$60
$83
$95
$32
$51
$35
+9% yoy
+15% yoy
May 2013 Investor Presentation
24.0%
24.5%
25.0%
25.5%
26.0%
26.5%
27.0%
27.5%
28.0%
28.5%
29.0%
$-
$20
$40
$60
$80
$100
$120
2010 2011 2012
Adj EBITDA Margin
26.0%
26.5%
27.0%
27.5%
28.0%
$20
$21
$22
$23
$24
$25
$26
Q1 12 Q1 13
Adj EBITDA Margin
Mills
(1) Adjusted EBITDA. This non-GAAP financial measure is described and reconciled to its comparable GAAP measure in the accompanying tables available in
the Appendix to this presentation as well as the Supplemental Data Schedule within the Quarterly and Annual Results tab of the investor relations section of
the Company’s website at ir.demandmedia.com.
(2) Adjusted EBITDA as a percent of Revenue ex-TAC. 28
26.7%
$62
25.8%
27.5%
28.6%
$86
$103.4
$25 $103
Mills
May 2013 Investor Presentation
$22
26.4%
UNIQUE and SCALABLE Content Creation and Monetization
Platform with one of the Largest O&O Audiences in the World
Well Positioned to Further DIVERSIFY Distribution and Revenue Models
Substantial CASH FLOW Generation to Invest in Long-Term Growth
WORLD’S LARGEST Wholesale Domain Name Registrar
Leading Participant in NEW gTLD Opportunity
TRANSFORMING REGISTRAR into one of the Largest End-to-End Domain Services
Providers
29 May 2013 Investor Presentation
32
To provide investors and others with additional information regarding the Company’s financial results, this presentation includes the following non-GAAP financial
measures: adjusted earnings before interest, taxes, depreciation and amortization expense, or Adjusted EBITDA, revenue less traffic acquisition costs, or Revenue less
TAC, discretionary free cash flow and total free cash flow. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial
measures has been included in the appendix to this presentation. The Company’s non-GAAP Adjusted EBITDA financial measure differs from GAAP Net Income in that
it excludes taxes, interest and other expenses (income), as well as certain expenses such as depreciation, amortization, stock-based compensation, the financial
impact of acquisition and realignment costs, the formation expenses directly related to its gTLD initiative, and any gains or losses on certain asset sales or dispositions.
The Company’s non-GAAP Revenue less TAC financial measure differs from GAAP as it reflects the Company’s consolidated revenues net of its traffic acquisition
costs. The Company’s non-GAAP free cash flow financial measures differ from GAAP as discretionary free cash flow reflects the Company’s cash flows from operating
activities, excluding cash outflows from acquisition and realignment activities, the formation expenses directly related to i ts gTLD initiative, and expenditures related to
the separation of Demand Media into two distinct publicly traded companies, less capital expenditures; and total free cash flow reflects discretionary free cash flow net
of intangibles investment.
The Company uses these non-GAAP financial measures to measure its consolidated operating performance, to understand and compare operating results from period
to period, to analyze growth trends, to assist in internal budgeting and forecasting purposes, to develop short and long term operational plans, to calculate annual bonus
payments for substantially all of its employees, and to evaluate its financial performance. The Company also frequently uses Adjusted EBITDA in its discussions with
investors, commercial bankers and other users of the Company’s financial statements.
Management believes these non-GAAP financial measures reflect the Company’s ongoing business in a manner that allows for meaningful period to period
comparisons and analysis of trends. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA can provide a useful measure for period to period
comparisons of the Company’s business underlying recurring revenue and operating costs which is focused more closely on the current costs necessary to utilize
previously acquired long-lived assets. In addition, the Company believes that it can be useful to exclude certain non-cash charges because the amount of such
expenses is the result of long-term investment decisions in previous periods rather than day-to-day operating decisions. For example, due to the long-lived nature of the
Company’s media content, revenue generated from the Company’s content assets in a given period bears little relationship to the amount of the Company’s investment
in content in that same period. Accordingly, Management believes that content acquisition costs represent a discretionary long-term capital investment decision
undertaken by management at a point in time. This investment decision is clearly distinguishable from other ongoing business activities, and its discretionary nature and
long term impact differentiate it from specific period transactions, decisions regarding day-to-day operations, and activities that would have immediate performance
consequences if materially changed, deferred or terminated.
The Company believes that Revenue less TAC is a meaningful measure of operating performance because it is frequently used for internal managerial purposes and
helps facilitate a more complete period to period understanding of factors and trends affecting the Company’s underlying revenue performance.
Accordingly, the Company also believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating
the Company’s consolidated revenue and operating results in the same manner as Company management and in comparing financial results across accounting periods
and to those of peer companies.
The use of non-GAAP financial measures has certain limitations because they do not reflect all items of income and expense that affect the Company’s operations. The
Company compensates for these limitations by reconciling the non-GAAP financial measures to the most comparable GAAP financial measures. These non-GAAP
financial measures should be considered in addition to, not as a substitute for, measures prepared in accordance with GAAP. Further, these non-GAAP measures may
differ from the non-GAAP information used by other companies, including peer companies, and therefore comparability may be limited. The Company encourages
investors and others to review the Company’s financial information in its entirety and not rely on a single financial measure.
May 2013 Investor Presentation
33
(In thousands, except per share data) Q1 12 Q1 13 2010 2011 2012
Revenue
Content & Media $ 53,963 $ 65,291 $ 152,911 $ 205,450 $ 246,399
Registrar 32,271 35,329 100,026 119,417 134,179
Total Revenue $ 86,234 $ 100,620 $ 252,937 $ 324,866 $ 380,578
TAC (Traffic Acquisition Cost) (1) $ 3,379 $ 5,436 $ 12,213 $ 12,494 $ 19,442
Content & Media ex-TAC $ 50,584 $ 59,855 $ 140,698 $ 192,955 $ 226,958
Registrar 32,271 33,329 100,026 119,417 134,179
Total Revenue ex-TAC $ 82,854 $ 95,184 $ 240,724 $ 312,372 $ 361,137
Adjusted EBITDA (In thousands)
Net income (loss) $ (1,842) $ 669 $ (5,325) $ (18,525) $ 6,176
Tax Provision (1,195) 373 3,897 4,178 1,783
Interest & Other Expenses 141 224 948 1,219 691
Depreciation 4,964 5,345 18,266 20,958 19,658
Amortization of intangible assets (2) 11,956 9,559 33,751 47,174 40,676
Stock-based compensation (3) 7,391 7,263 9,689 28,855 31,368
gTLD expense (4) 429 1,618 2,650
Acquisition and realignment costs (5) 61 376 779 2,100 446
Adjusted EBITDA $ 21,905 $ 25,427 $ 62,005 $ 85,958 $ 103,448
Notes:
Some figures in this presentation may not foot due to rounding.
(1) Traffic acquisition costs comprise the portion of Content & Media GAAP revenue shared with the Company's network customers.
(2) Represents the amortization expense of our finite lived intangible assets, including that related to our investment in media content assets, included in our GAAP results of operations.
(3) Represents the fair value of stock-based awards and certain warrants to purchase our stock included in our GAAP results of operations.
(4) Comprises formation expenses directly related to the Company's gTLDs initiative that did not generate associated revenue in 2012 or in Q1 2013.
(5) Acquisition and realignment costs include such items, when applicable, as (1) non-cash GAAP purchase accounting adjustments for certain deferred revenues and costs, (2) legal,
accounting and other professional fees directly attributable to acquisition activity, (3) employee severance payments attributable to acquisition or corporate realignment activities, and (4) gain on sale of assets. Management does not consider these expenses as indicative of the Company’s ongoing operating results or future outlook.
May 2013 Investor Presentation