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View Annual Report Dear Fellow Shareholders, I am extremely proud of Demand Media’s accomplishments in 2012. We delivered record financial results, enhanced our content creation and distribution platform, and positioned our registrar and registry platform to become a leading provider of end-to-end domain services. Our unique media platform – a scalable way to discover, create and distribute content – provides a solid foundation for future growth as we diversify into new distribution channels, new geographies, and new paid content models. Our leading registrar platform and our new registry technologies position us for leadership in the domain registration services market, particularly as ICANN’s new generic Top Level Domain (“gTLD”) initiative reshapes the way consumers and businesses think about personalizing their online destinations. We are proud to be at the forefront of innovation for both of these exciting growth opportunities, and look forward to expanding our service offerings and platforms this year. 2012 Accomplishments Content & Media During 2012, we strengthened Demand Media’s long-term competitive position and set the stage for future growth by significantly enhancing our content creation and distribution platform. We focused on higher quality and more engaging content, emphasizing expert talent, and we expanded the variety of content we produce, such as slide shows, videos, feature articles and mobile-friendly formats. Further, we expanded the distribution of our content to a broader range of partners and geographies. We distributed the majority of new content published in 2012 on our rapidly growing network of content partners and our emerging international sites. This drove year-over-year page view growth on content channels by nearly six-fold and more than tripled our international site page views. Our content is also well suited for mobile, which enabled us to significantly improve mobile monetization, growing revenue per thousand impressions (RPMs) by over 75% throughout the year. We also grew our mobile audience substantially, with mobile driving 26% of visits to our core owned & operated sites by the end of 2012. These achievements, combined with continued growth of our content library, drove record traffic to our sites. According to comScore, in March 2013, our websites reached a global audience of over 126 million unique monthly visitors, ranking as the 29th largest property in the world. Our content & media business touches 1 in every 3 consumers online in the U.S. every month, providing instruction, advice, and insight on just about everything they encounter throughout their day. Our goal is simple: serve as a key touch point in people’s lives by connecting them to content that is personally relevant. We are proud of the progress we have made and even more excited about the opportunities ahead. Registrar In 2012, we positioned our registrar business as a leading player in the upcoming new gTLD market – we expanded our domains under management and our reseller footprint, added retail registrar capabilities, and applied to become a registry for new gTLDs. Over the last three years, we grew domains under management by 66% to approximately 15 million names. We currently service nearly 8,800 resellers, reaching millions of businesses and consumers. At the end of the year, we acquired Name.com to add a direct retail presence to our service platform. In 2012, we invested substantial time and resources towards our new gTLD growth initiatives. We filed 26 stand-alone gTLD applications, and share equal rights to an additional 107 gTLDs with a strategic partner. We are also leveraging our technical know-how to establish ourselves as a leading registry service provider, providing back-end services to other registries. We expect to begin to transform our registrar services business into a leading end-to-end domain services provider when the new gTLDs start launching later this year. 2013 Goals and Objectives Content & Media We plan to leverage the power of our expert-driven content creation studio as we seek to more than double our investment in content in 2013 compared with 2012. We plan to build on our initial success with content channel partners and our emerging international sites by adding a majority of the new content we publish in 2013 to these distribution points. In addition, we plan to use the extensive data on how consumers are accessing our content via mobile devices to develop new mobile-centric content. We will also leverage our audience, data, and content creation platform to expand beyond advertising-driven content with new paid content opportunities such as e-learning, experts-on-demand and subscription services. We accelerated our paid content strategy with the recent acquisition of Creativebug, a leading online destination for art and craft instruction. In addition, we plan to launch a new LIVESTRONG.com subscription-based 30 minute daily workout program and meal plan that is integrated with our calorie tracker. We are also testing an expert-on-demand service, powered by our studio of experts, which engages users in real-time with a deeper level of advice and interaction. We expect our increased investment in new content and expansion into paid content offerings to drive future growth as well as diversify and strengthen our content & media platform. Registrar Our registrar business is preparing for the launch of more than 1,000 new gTLDs, which we believe represents a historic event for the internet that will unlock more consumer choice and generate new growth opportunities. New gTLDs offer consumers and businesses additional opportunities to brand themselves online with unique web addresses that are typically unavailable with a .com and .net extension. We also view the upcoming launch of gTLDs as a transformative event for our registrar services business as we transition from a high volume, wholesale distribution model to an end-to-end domain services business featuring registry and other value added services. Through our platform, we will register unique domain names for consumers and businesses, and provide value added solutions to build out these new web addresses. Creation of Two Independent Publicly Traded Companies Our two strong businesses are addressing increasingly distinct growth opportunities and markets. In February 2013, our Board authorized management to explore the separation of Demand Media into two independent, publicly traded companies: • A leading online media company delivering quality content to over 100 million monthly consumers, and • A leading end-to-end domain services company supporting millions of businesses and consumers. We believe that a separation will better position each of our companies to pursue its unique strategic priorities and opportunities. Once the spin-off is completed, Demand Media will become a pure-play media company with a powerful outsourced content creation platform, leading web properties that reach over 100 million monthly unique visitors, and a unique monetization platform that incorporates branded, network and mobile optimizations. Our new domain services company will be one of the only end-to-end domain services providers, with a large registry that includes numerous gTLDs, expansive wholesale and retail distribution, and, through a joint venture, a dominant aftermarket platform to buy, sell and monetize domain names. In short, in 2012, we significantly enhanced our content creation process and expanded our distribution, leading to record traffic growth and financial results. We also set the stage for future growth with our investments in mobile, international, content channels and gTLDs. In 2013, we are excited to further diversify and strengthen both our content & media and domain services businesses, and position each as a leader in its respective market. We believe the separation of Demand Media into two distinct publicly traded companies will better enable each business to capitalize on its respective growth opportunities. I’d like to thank all of our employees for their outstanding efforts over the past year. I’d also like to thank you, our shareholders, for your continuing support as we embark on these exciting growth initiatives. Thank you, Richard Rosenblatt Chairman and CEO UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________________________________________________ FORM 10-K __________________________________________________ (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2012 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-35048 DEMAND MEDIA, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of 20-4731239 incorporation or organization) (I.R.S. Employer Identification Number) 1299 Ocean Avenue, Suite 500 Santa Monica, CA 90401 (Address of principal executive offices) (Zip Code) (310) 394-6400 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: (Title of each class) (Name of each exchange on which registered) Common Stock, $0.0001 par value The New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None. (Title of Class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not
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