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DEMAND MEDIA INC. (DMD)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 03/01/2011
Filed Period 12/31/2010

Table of contents

  • Page 1
    DEMAND MEDIA INC. (DMD) 10-K Annual report pursuant to section 13 and 15(d) Filed on 03/01/2011 Filed Period 12/31/2010

  • Page 2
    ... 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 incorporation or organization) 1299 Ocean Avenue, Suite 500 Santa Monica, CA (Address of principal executive offices) (310...

  • Page 3
    ...'s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting...

  • Page 4
    ... Data Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A Controls and Procedures Item 9B Other Information PART III. Item 10 Directors, Executive Officers and Corporate Governance Item 11 Executive Compensation Item 12 Security Ownership of Certain...

  • Page 5
    ...," or "us" and similar terms include Demand Media, Inc. and its subsidiaries, unless the context indicates otherwise. "Demand Media" and other trademarks of ours appearing in this report are our property. This report contains additional trade names and trademarks of other companies. We do not intend...

  • Page 6
    ... e-commerce websites, Internet service providers and web-hosting companies. • We generate revenue primarily through the sale of advertising on our owned and operated websites and on websites operated by our customers. We also generate revenues through domain name registration subscriptions and...

  • Page 7
    ... of the Internet and social media has enabled consumers to seek out and interact with content across an increasing number of websites. As a result, consumers are changing the way they discover content online, increasingly typing queries into web search engines to discover and access content from the...

  • Page 8
    ... websites and our network of customer websites, a qualified community of freelance content creators and access to proprietary Internet data. We believe these attributes will help us to achieve our mission to fulfill the world's demand for commercially valuable content. Our Content & Media service...

  • Page 9
    ... over 500,000 undeveloped websites that we own. Our platform helps power websites for customers such as the San Francisco Chronicle (SFGate.com) and the National Football League (NFL.com). We have also begun to expand the distribution of our content by offering our Registrar customers the ability to...

  • Page 10
    ... of our platform to our customers including, among others, website publishers, branded product and services marketers, retailers, web-hosting companies and domain name resellers. Our customers also benefit from the services offered by our Registrar, such as domain name registration and other...

  • Page 11
    ... that maximizes advertising revenue and end-user experience; and Reinvest back into our platform to generate additional content, improve our proprietary algorithms and processes and expand our network of owned and operated websites and customer websites. Content & Media Products and Services Content...

  • Page 12
    ... combined with interactive tools and social media community features, help users create customized goals and monitor their health, fitness and life achievements. In addition to eHow and LIVESTRONG.com, our owned and operated websites include Cracked.com, a leading humor website offering original...

  • Page 13
    ... service providers and web-hosting companies. These resellers, in turn, contract directly with domain name registrants to deliver these services. Our Registrar service offering gives resellers the choice of either a highly customizable API model or a turnkey solution. Our customizable API solution...

  • Page 14
    ... services that help keep domain owners' information private through our ID Protect service; web hosting plans for both Linux and Windows; and customizable email accounts that allow the customer to set up multiple mailboxes using a domain name. We have also developed a number of proprietary services...

  • Page 15
    ... companies such as Jive Software and Lithium. Registrar The markets for domain name registration and web-based services are intensely competitive. We compete for business on a number of factors including price, value-added services, such as e-mail and web-hosting, customer service and reliability...

  • Page 16
    ... do not register the copyrights associated with our content with the United States Copyright Office. Government Regulation Advertising and promotional information presented to visitors on our websites and our other marketing activities are subject to federal and state consumer protection laws that...

  • Page 17
    ...conditions favorable to us. If our agreements with Google, in particular the cost-per-click agreement for our developed websites, are terminated we may not be able to enter into agreements with alternative third-party advertisement providers or ad-serving platforms on acceptable terms or on a timely...

  • Page 18
    ... to create content in a cost effective manner or that meets rapidly changing consumer demand in a timely manner, if at all. Any such failure to do so could adversely affect user and customer experiences and reduce traffic driven to our owned and operated websites and to our customer websites through...

  • Page 19
    ... freelance content creators, is unacceptable or violates their corporate policies. Any reduction in the number of users directed to our owned and operated websites and to our customers' websites would negatively affect our ability to earn revenue. If traffic on our owned and operated websites and on...

  • Page 20
    ... commercial agreements and, in such an event, we may experience a rapid decline in our revenue from the loss of our source for cost-per-click advertising on our owned and operated websites and on our network of customer websites. In addition, Google's access to more comprehensive data regarding user...

  • Page 21
    ...and 2010, respectively, from advertising. One component of our platform that we use to generate advertiser interest in our content is our system of monetization tools, which is designed to match content with advertisements in a manner that maximizes revenue yield and end-user experience. Advertisers...

  • Page 22
    ...that we published during these periods was published to eHow. eHow depends on various Internet search engines to direct traffic to the site. For the quarter ended December 31, 2010, approximately 65% of eHow's page view traffic came from Google searches. Any changes in search engine methodologies or...

  • Page 23
    ... that the content created by our freelance content creators will be of sufficient quality to attract users to our owned and operated websites and to our network of customer websites. In addition, we have no written agreements with these persons which obligate them to create articles or videos...

  • Page 24
    ... number of people who access the Internet through devices other than personal computers has increased substantially in the last few years. In general our Content & Media services were designed for persons accessing the Internet on a desktop or laptop computer. The smaller screens, lower resolution...

  • Page 25
    ...of traditional computer Internet access, we will experience difficulty attracting website visitors and attracting and retaining customers and our operating results and business will be harmed. We are dependent upon the quality of traffic in our network to provide value to online advertisers, and any...

  • Page 26
    ... websites whose domain names may be identical or similar to another party's trademark or the name of a living or deceased person. A number of our owned and operated websites and our network of customer websites are undeveloped or minimally developed properties that primarily contain advertising...

  • Page 27
    ... expanding the variety of services that they offer. These competitors include, among others, domain name registrars, website design firms, website hosting companies, Internet service providers, Internet portals and search engine companies, including GoDaddy, Network Solutions, Tucows, Microsoft and...

  • Page 28
    ... service that enables users to register domain names and populate websites with content. We do not monitor or review, nor does our accreditation agreement with ICANN require that we monitor or review, the appropriateness of the domain names we register for our customers or the content of our network...

  • Page 29
    ... party registering a domain name that is identical or similar to another party's trademark or the name of a living person. These disputes are typically resolved through the Uniform Domain-Name Dispute-Resolution Policy, or UDRP, ICANN's administrative process for domain name dispute resolution, or...

  • Page 30
    ... domain name registration service, wherein we become the domain name registrant, on a proxy basis, on behalf of our customers. While we have a policy of providing the underlying Whois information and reserve the right to cancel privacy services on domain names giving rise to domain name disputes...

  • Page 31
    ...be terminated by ICANN preventing us from operating our Registrar; ICANN and, under their registry agreements, VeriSign and other registries may impose increased fees received for each ICANN accredited registrar and/or domain name registration managed by those registries; international regulatory or...

  • Page 32
    ...adversely impacted. As the number of domain registrations increases and the number of available domain names with commercial value diminishes over time, and if it is perceived that the more desirable domain names are generally unavailable, fewer Internet users might register domain names with us. If...

  • Page 33
    ... of services sold in a particular period between our Registrar and our Content & Media service offerings; changes in our pricing policies or those of our competitors, changes in domain name fees charged to us by Internet registries or the Internet Corporation for Assigned Names and Numbers, or ICANN...

  • Page 34
    ... content; maintain our standing with key advertisers as well as Internet search companies and our network of customer websites; maintain our customer service standards; develop and improve our operational, financial and management controls and maintain adequate reporting systems and procedures; 32

  • Page 35
    ... useful to our customers in both our Content & Media and Registrar service offerings. Our competitors are constantly developing innovations in content creation and distribution as well as in domain name registration and related services, such as web hosting, email and website creation solutions...

  • Page 36
    ...or certain pages of our customers' websites, we use technologies, including "cookies," to collect information related to the user, such as the user's Internet Protocol, or IP, address, demographic information, and history of the user's interactions with advertisements previously delivered by us. The...

  • Page 37
    ... power loss, telecommunications failures, computer viruses or other attempts to harm our systems. We, and in particular our Registrar, have experienced an increasing number of computer distributed denial of service attacks which have forced us to shut down certain of our websites, including eNom.com...

  • Page 38
    ... & Media and Registrar service offerings involve the storage and transmission of users', Registrar customers' and our freelance content creators' personal information, such as names, social security numbers, addresses, email addresses and credit card and bank account numbers, and security breaches...

  • Page 39
    ... competitors or to settle current or future disputes will not be limited by our agreements with third parties; our intellectual property rights will be enforced in jurisdictions where competition may be intense or where legal protection may be weak; any of the patents, trademarks, copyrights...

  • Page 40
    ... and other theories based on our content, products and services or content generated by our users. We receive, process and store large amounts of personal data of users on our owned and operated websites and from our freelance content creators. Our privacy and data security policies govern the 38

  • Page 41
    ...business, financial condition or results of operations. Many of the customers of our Content & Media and Registrar service offerings pay amounts owed to us using a credit card or debit card. For credit and debit card payments, we pay interchange and other fees, which may increase over time and raise...

  • Page 42
    ...pay retroactive taxes and penalties and significantly increase our cost of operations. As of December 31, 2010, we contracted with approximately 13,000 freelance content creators as independent contractors to create content for our owned and operated websites and for our network of customer websites...

  • Page 43
    ... and integrate the websites, business, technologies, solutions, personnel or operations of the company that we acquired, particularly if key personnel of an acquired company decide not to work for us. In addition, we may incur indebtedness to complete an acquisition, which would increase our costs...

  • Page 44
    ... the recent recession has adversely affected our business. To the extent that the current weak economic conditions continue, or materially deteriorate, our existing and potential advertisers and customers may no longer use our content or register domain names through our Registrar service offering...

  • Page 45
    ...price of our common stock. As of January 31, 2011, we had 82,852,253 shares of common stock outstanding. Of these shares, a substantial majority are currently restricted as a result of securities laws, lock-up agreements or other contractual restrictions that restrict transfers for at least 180 days...

  • Page 46
    ... adverse effect on the price of our common stock. Failure to comply with the new rules might make it more difficult for us to obtain certain types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage and/or incur...

  • Page 47
    ... determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; the exclusive right of our board of directors to elect a director to fill a vacancy created by...

  • Page 48
    ...consumer rights. The plaintiffs claim that Clearspring worked with Demand Media and each of the other defendants to circumvent users' privacy expectations by installing a tracking device and accessing users' computers to obtain user personal information and data. Plaintiffs seek actual and statutory...

  • Page 49
    ..., our credit agreement with a syndicate of commercial banks currently prohibits our payment of dividends. Equity Plan Information Our equity plan information required by this item is incorporated by reference to the information in Part III, Item 12 of this Annual Report on Form 10K. Recent Sales of...

  • Page 50
    ... registered on the registration statements. Goldman, Sachs & Co. and Morgan Stanley & Co. Incorporated were the joint book-runners and the representatives of the underwriters. No offering expenses were paid directly or indirectly to any of our directors or officers (or their associates) or persons...

  • Page 51
    ... Item 6. Selected Financial Data Demand Media was incorporated on March 23, 2006 and had no substantive business activities prior to the acquisition of eNom, Inc in April 2006. The consolidated statements of operations data for the years ended December 31, 2008, 2009 and 2010, as well as the...

  • Page 52
    ...to period comparisons, to prepare and approve our annual budget and to develop short and long term operational plans. Additionally, Adjusted OIBDA is the only measure used by the compensation committee of our board of directors to establish the target for and ultimately pay our annual employee bonus...

  • Page 53
    ...,723 (479) 18,266 33,750 9,689 779 - 62,005 $ Represents revenue-sharing payments made to our network customers from advertising revenue generated from such customers' websites. Represents the amortization expense of our finite lived intangible assets, including that related to our investment in...

  • Page 54
    ...our network of customer websites. Our Content & Media service offering also includes a number of websites primarily containing advertising listings, which we refer to as our undeveloped websites. Our Registrar is the world's largest wholesale registrar of Internet domain names and the world's second...

  • Page 55
    ...Year ended December 31, 2008(1) 2009(1) 2010(1) % Change 2009 to 2010 % Change Content & Media Metrics: Owned & operated Page views (in millions) RPM Network of customer websites Page views (in millions) RPM RPM ex-TAC Registrar Metrics: End of Period # of Domains (in millions) Average Revenue per...

  • Page 56
    ... with our Content & Media service offering and through domain name registration subscriptions in our Registrar service offering. Our advertising revenue is primarily generated by performance-based Internet advertising, such as cost-per-click where an advertiser pays only when a user clicks on its...

  • Page 57
    ... for wholesale registrar services is both price sensitive and competitive, particularly for large volume customers, such as large web hosting companies and owners of large portfolios of domain names. We have a relatively limited ability to increase the pricing of domain name registrations without...

  • Page 58
    ... and transferred domain name registrations. In addition, our Registrar also generates revenue from the sale of other value-added services that are designed to help our customers easily build, enhance and protect their domains, including security services, e-mail accounts and web-hosting. Finally...

  • Page 59
    ...editorial, customer service and information technology. Our service costs are dependent on a number of factors, including the number of page views generated across our platform and the volume of domain registrations and value-added services supported by our Registrar. In the near term and consistent...

  • Page 60
    ... stock-based compensation during the first quarter of 2011 related to awards granted to certain executive officers to acquire approximately 2.6 million of our shares that vested in the first quarter of 2011 upon meeting an average closing price of our stock for a stipulated period of time subsequent...

  • Page 61
    ... change," as defined in Section 382 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. Currently, we do not expect the utilization of our net operating loss and tax credit carry-forwards in the near term to be materially affected as no significant limitations are...

  • Page 62
    ... our social media services through initial set-up fees, recurring management support fees, overage fees in excess of standard usage terms and outside consulting fees. Due to the fact that our social media services customers have no contractual right to take possession of our software, we account for...

  • Page 63
    ...The registration term and related revenue recognition commences once we confirm that the requested domain name has been recorded in the appropriate registry under accepted contractual performance standards. Associated direct and incremental costs, which principally consist of registry and ICANN fees...

  • Page 64
    ...but are not limited to, security certificates, domain name identification protection, charges associated with alternative payment methodologies, web hosting services and email services is recognized on a straight line basis over the period in which services are provided. Payments received in advance...

  • Page 65
    Table of Contents receivable. We determine the allowance based on analysis of historical bad debts, advertiser concentrations, advertiser credit-worthiness and current economic trends. In addition, past due balances over 90 days and specific other balances are reviewed individually for ...

  • Page 66
    ... number of page views and the advertising rates that the content will generate. These estimates and judgments take into consideration various inherent uncertainties including, but not limited to, our expected ability to renew at favorable terms or replace certain material agreements with Google...

  • Page 67
    ... in which a long-lived asset is being used, significant adverse change in legal factors, including changes that could result from our inability to renew or replace material agreements with certain of our partners such as Google on favorable terms, significant adverse changes in the business climate...

  • Page 68
    ...for equity-based payments to non-employees. Stock option awards to non-employees are accounted for at fair value using the Black-Scholes option pricing model. Our management believes that the fair value of stock options is more reliably measured than the fair value of the services received. The fair...

  • Page 69
    ... holding period. The risk free interest rate is based on the implied yield currently available on U.S. Treasury issues with terms approximately equal to the expected life of the option. The expected dividend rate is zero based on the fact that we currently have no history or expectation of paying...

  • Page 70
    ...The following tables set forth our results of operations for the periods presented. The period-to-period comparison of financial results is not necessarily indicative of future results. Year ended December 31, 2008 2009 (In thousands) 2010 Revenue Operating expenses(1)(2): Service costs (exclusive...

  • Page 71
    ... (1.5)% (2.1)% % Change Year Ended December 31, 2008 2009 (In thousands) 2010 2008 to 2009 2009 to 2010 Content & Media: $ Owned and operated websites Network of customer websites Total Content & Media Registrar $ Total revenue Content & Media Revenue from Owned and Operated Websites • 62,833...

  • Page 72
    ... by increased display advertising revenue sold directly through our sales force during the year ended December 31, 2010 as compared to 2009. On average, our direct display advertising sales generate higher RPMs than display advertising that we deliver from our advertising networks, such as Google...

  • Page 73
    ... 2009 largely due to a higher mix of volume-based domain resellers transferring over their domain registrations in the latter half of 2010 as compared to 2009. 2009 compared to 2008. Registrar revenue for the year ended December 31, 2009 increased $5.3 million or 6%, to $90.7 million compared to $85...

  • Page 74
    ... our network, a $1.7 million increase in revenue share payments and a $3.7 million increase in depreciation expense of technology assets purchased in the prior and current periods required to manage the growth of our Internet traffic, data centers, advertising transactions, domain registrations and...

  • Page 75
    ... fees primarily related to our public company readiness efforts, a $0.7 million increase in stock-based compensation expense, a $0.4 million increase in rent expense for additional office space to support our growth, and the inclusion of a $0.6 million gain on sale of one of our acquired website...

  • Page 76
    ... of our receiving higher returns on our cash and short-term investment balances during the year ended December 31, 2008, coupled with higher average cash balances during the year ended December 31, 2008 as a result of our decision to pay down $45.0 million on our revolving line of credit throughout...

  • Page 77
    .... In addition, the increase was also due to corresponding movements in state deferred tax balances as a result of changes in state tax laws and the Company's state tax apportionment rates during 2010. 2009 compared to 2008. During the year ended December 31, 2009, we recorded an income tax provision...

  • Page 78
    ... 30, December 31, 2009 2009 2009 2009 2010 2010 2010 2010 (in thousands, except per share data) Revenue: Content & Media: Owned and operated websites Network websites Total Content & Media Registrar Total revenue Operating expenses(1)(2): Service costs (exclusive of amortization of intangible assets...

  • Page 79
    ... 1,009 1,035 1,064 Total stock-based $1,841 $1,740 $2,160 $1,995 $2,242 $2,529 $2,372 $2,546 compensation (3) Service costs include: traffic acquisitions costs of (4) $1,641 $2,261 $3,072 $3,580 $2,693 $3,063 $3,155 $3,302 For a description of the method used to compute our basic and diluted net...

  • Page 80
    ... revolving credit facility. Our cash flows from operating activities are significantly affected by our cash-based investments in operations, including working capital, and corporate infrastructure to support our ability to generate revenue and conduct operations through cost of services, product...

  • Page 81
    ... revenue and deferred registry fees were due to growth in our Registrar service during the period. The increase in accrued expenses is reflective of significant amounts due to certain vendors and our employees. The increase in our accounts receivable reflects growth in advertising revenue from our...

  • Page 82
    ...generating sufficient cash flow to support our operating and investing activities at such time and we had sufficient cash on our balance sheet to do so. During the year ended December 31, 2008, gross borrowings under our revolving credit facility were $55.0 million and were primarily used to finance...

  • Page 83
    ...contractual purchase obligations for undeveloped websites with one of our partners. Included in operating lease obligations are agreements to lease our primary office space in Santa Monica, California and other locations under various non-cancelable operating leases that expire between February 2011...

  • Page 84
    ...condition of our large advertising network providers, large direct advertisers and their agencies, large Registrar resellers and other large customers when we enter into or amend agreements with them and limit credit risk by collecting in advance when possible and setting and adjusting credit limits...

  • Page 85
    ... 15 of this Annual Report on Form 10K and are incorporated herein by reference. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None Item 9A. Controls and Procedures Disclosure Controls and Procedures The Company maintains a set of disclosure controls...

  • Page 86
    ...There has been no change in the Company's internal control over financial reporting during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. Item 9B. None. 83 Other Information

  • Page 87
    Table of Contents PART III Item 10. Directors, Executive Officers, and Corporate Governance The information required by this item will be set forth in our definitive proxy statement with respect to our 2011 annual meeting of stockholders (the "2011 Proxy Statement") to be filed with the SEC, which...

  • Page 88
    ... SEC on October 29, 2010) 4.02 4.03 10.01* Form of Indemnification Agreement entered into by and between Demand Media, Inc. and each of its directors and executive officers (incorporated by reference to Exhibit 10.01 to the Company's Amendment No. 2 to the Registration Statement on Form S-1 (File...

  • Page 89
    ...No. 333-168612) filed with the SEC on August 6, 2010) 10.10A* Employment Agreement between Demand Media, Inc. and Shawn Colo, dated August 31, 2010 (incorporated by reference to Exhibit 10.10A to the Company's Amendment No. 4 to the Registration Statement on Form S-1 (File No. 333-168612) filed with...

  • Page 90
    ... 2010) 10.15* Demand Media Inc. 2006 Equity Incentive Plan Restricted Stock Purchase Agreement, between Demand Media, Inc. and Richard Rosenblatt, dated April 19, 2007, amended April 27, 2007, amended further February 10, 2010 (incorporated by reference to Exhibit 10.15 to the Company's Registration...

  • Page 91
    ... 6, 2010) 10.24 Google Services Agreement, between Google, Inc. and Demand Media, Inc., dated May 28, 2010 (incorporated by reference to Exhibit 10.24 to the Company's Registration Statement on Form S-1 (File No. 333-168612) filed with the SEC on August 6, 2010) Credit Agreement, among Demand Media...

  • Page 92
    ...21.01 23.01 31.01 List of subsidiaries of Demand Media, Inc. Consent of Independent Registered Public Accounting Firm Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the...

  • Page 93
    ... 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DEMAND MEDIA, INC. By: /s/ RICHARD M. ROSENBLATT Richard M. Rosenblatt Chairman and Chief Executive Officer Date: March 1, 2011 POWER OF ATTORNEY Each person whose individual...

  • Page 94
    ... Name Title /s/ VICTOR E. PARKER Victor E. Parker /s/ GAURAV BHANDARI Gaurav Bhandari /s/ JOHN A. HAWKINS John A. Hawkins /s/ JAMES R. QUANDT James R. Quandt /s/ PETER GUBER Peter Guber /s/ JOSHUA G. JAMES Joshua G. James /s/ ROBERT R. BENNETT Robert R. Bennett 91 Director Director Director...

  • Page 95
    Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Demand Media, Inc. Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets Consolidated Statements of Operations Consolidated Statements of Stockholders' Deficit ...

  • Page 96
    Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Demand Media, Inc.: In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, stockholders' deficit and cash flows ...

  • Page 97
    ... Contents Demand Media, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands, except per share amounts) December 31, 2009 2010 Assets Current assets Cash and cash equivalents Marketable securities Accounts receivable, net Prepaid expenses and other current assets Deferred registration...

  • Page 98
    The accompanying notes are an integral part of these consolidated financial statements. F-3

  • Page 99
    ...Demand Media, Inc. and Subsidiaries Consolidated Statements of Operations (In thousands, except per share amounts) Year ended December 31, 2008 2009 2010 Revenue Operating expenses Service... average number of shares The accompanying notes are an integral part of these consolidated financial statements....

  • Page 100
    ... exercise of stock options Income tax windfall benefits Issuance of warrants to purchase common stock Stock-based compensation expense Foreign currency translation adjustment Net loss Comprehensive loss Balance at December 31, 2010 13,917 221 - 348 (13) - $ 1 $ 6,338 - - - - 18 3,475 376 - 5,365...

  • Page 101
    ... assets Purchases of marketable securities Proceeds from maturities and sales of marketable securities Cash paid for acquisitions, net of cash acquired Other investing activities Net cash used in investing activities Cash flows from financing activities Proceeds from line of credit Payments on...

  • Page 102
    Deferred offering costs included in accounts payable and accrued expenses - - 2,115 The accompanying notes are an integral part of these consolidated financial statements. F-6

  • Page 103
    ...platform, which includes its content creation studio, social media applications and a system of monetization tools designed to match content with advertisements in a manner that is optimized for revenue yield and end-user experience. Registrar The Company's Registrar service offering provides domain...

  • Page 104
    ... maturity of 90 days or less at the time of purchase to be cash equivalents. The Company considers funds transferred from its credit card service providers but not yet deposited into its bank accounts at the balance sheet dates, as funds in transit and these amounts are recorded as unrestricted cash...

  • Page 105
    ...in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. The Company has determined that there has been no impairment of its equity marketable securities to date. The cost of marketable securities sold is based upon the specific identification method and any...

  • Page 106
    ... fee using the residual method. The Company's revenue is principally derived from the following services: Content & Media Advertising Revenue. Advertising revenue is generated by performance-based Internet advertising, such as cost-per-click, or CPC, in which an advertiser pays only when a user...

  • Page 107
    ... Accounting Policies (Continued) of the membership term, if not previously cancelled. Membership revenue is recognized on a straight-line basis over the membership term. The Company configures, hosts, and maintains its platform social media services under private-labeled versions of software...

  • Page 108
    ..., but is not limited to web hosting services, email services, domain name identification protection, charges associated with alternative payment methods, and security certificates, is recognized on a straight-line basis over the period in which services are provided. Payments received in advance of...

  • Page 109
    .... Accounts receivable from these customers are recorded at the revenue share as reported by the underlying customers and are generally due within 30 to 45 days. • • • The Company's Registrar services are primarily conducted on a prepaid basis or through credit card or Internet payments...

  • Page 110
    .... Registry services accounts receivable is recorded at the amount of registration fees paid by the Company to a registry for all registrations placed on auto-renew status. Subsequent to the lapse of a prior registration period, a registrant either renews the applicable domain name with the Company...

  • Page 111
    ... to acquire and to initially register its owned and operated undeveloped websites (i.e. Uniform Resource Locators). The Company amortizes these costs over the expected useful life of the underlying undeveloped websites on a straight-line basis. The expected useful lives of the website names range...

  • Page 112
    ... Policies (Continued) appropriate useful life by performing an analysis of expected cash flows based on historical experience with domain names of similar quality and value. In order to maintain the rights to each undeveloped website acquired, the Company pays periodic renewal registration fees...

  • Page 113
    ... award that has a market condition is recognized as the requisite service period is fulfilled, even if the market condition is never satisfied. Stock-based awards issued to non-employees are accounted for at fair value determined using the Black-Scholes option-pricing model. Management believes that...

  • Page 114
    ... Accounting Policies (Continued) more reliably measured than the fair value of the services received. The fair value of each non-employee stock-based compensation award is re-measured each period until a commitment date is reached, which is generally the vesting date. Advertising Costs Advertising...

  • Page 115
    ... excluded from weighted average common shares outstanding. Foreign Currency Transactions Foreign currency transaction gains and losses are charged or credited to earnings as incurred. For the years ended December 31, 2008, 2009 and 2010, the Company recorded a loss of $342, a gain of $52 and a loss...

  • Page 116
    ..., receivables from domain name registries, registry deposits, accounts payable, accrued liabilities and customer deposits approximate fair value because of their short maturities. The fair value of the Company's revolving line of credit is estimated using discounted cash flows based on the Company...

  • Page 117
    ... as the revolving line of credit and trade accounts receivable and payables, are reported at their carrying values. For financial assets that utilize Level 1 and Level 2 inputs, the Company utilizes both direct and indirect observable price quotes, including quoted market prices (Level 1 inputs) or...

  • Page 118
    ... all periods. The Company adopted ASU 2009-13 using the prospective method on January 1, 2011 and the adoption of this accounting standard did not have a material effect on the Company's financial position or results of operations. In October 2009, the FASB issued Update No. 2009-14, Software (Topic...

  • Page 119
    ... into or materially modified in fiscal years beginning on or after June 15, 2010. Alternatively, the Company may retrospectively apply the guidance to all periods. The Company adopted ASU 2009-14 using the prospective method on January 1, 2011 and the adoption did not have a material effect on the...

  • Page 120
    ...167 88,834 3.9 5.7 5.4 6.1 3.3 14.8 5.0 5.6 December 31, 2010 Gross carrying amount Accumulated amortization Net Weighted average useful life Owned website names Customer relationships Media content Technology Non-compete agreements Trade names Content publisher relationships $ 46,094 $ 24,355...

  • Page 121
    ... upon sale of marketable securities using the specific identification method. 7. Other Balance Sheets Items Accounts receivable, net consisted of the following: December 31, 2009 December 31, 2010 Accounts receivable-trade Receivables from registries Accounts receivable, net F-25 $ $ 16,277...

  • Page 122
    ...000 revolving credit agreement (see Note 9-Notes Payable and Revolving Line of Credit), the Company entered into three new standby letter of credit arrangements totaling $5,400, associated with certain payment arrangements with domain name registries and a $1,700 standby letter of credit, which F-26

  • Page 123
    ... period and (iii) in the event annual revenue generated under the Amended Domain Agreement is less than the Annual Guarantee (as defined), the Company is able to satisfy the difference through the purchase of the customer's then existing website names (as defined). The Amended Domain Agreement...

  • Page 124
    ... the purchase of website names for the Company's own use in April 2009 and March 2010, respectively. The Company expects to settle the final Annual Guarantee of the Amended Domain Agreement for the year ended December 31, 2010 through the purchase of website names in March 2011. Indemnifications...

  • Page 125
    ...pay dividends or make other distributions or payments on capital stock; make investments and acquisitions; enter into transactions with affiliates; transfer or sell substantially all of the Company's assets. At December 31, 2009 and 2010, the aggregate borrowings available under the Credit Agreement...

  • Page 126
    ... 31, December 31, 2008 2009 2010 Expected income tax benefit (expense) at U.S. statutory rate Difference between U.S. and foreign taxes State tax (expense) benefit, net of federal taxes Non-deductible stock-based compensation Tax-exempt income State rate changes Indirect federal impact of state...

  • Page 127
    ... and 383 of the Internal Revenue Code of 1986, as amended, provide for annual limitations on the utilization of net operating loss and credit carryforwards if the Company were to undergo an ownership change, as defined in Section 382. Changes in the Company's equity structure and the acquisitions by...

  • Page 128
    ...$15 in marketing services to the Company during the years ended December 31, 2008 and 2009, respectively. No services were provided during the year ended December 31, 2010. iCrossing was sold in June 2010 and as a result the composition of its board of directors and shareholders changed such that it...

  • Page 129
    ... received dedicated office space, internal resource time, the Company's proprietary social media applications and tools on its website, and a license to use certain Content on its website. As of December 31, 2009, the Company received its $57 fee, as well as certain promotional and branding services...

  • Page 130
    ... Company determined the expected term assumption based on the Company's historical exercise behavior combined with estimates of the post-vesting holding period. Prior to January 1, 2009, the Company did not have adequate history of exercises of its stock-based awards and used the simplified method...

  • Page 131
    ... equal to the expected life of the option. The Company currently has no history or expectation of paying cash dividends on its common stock. The expected term for performance-based and non-employee awards is based on the period of time for which each award is expected to be outstanding, which...

  • Page 132
    ... ended March 31, 2011 as a result of the Company's stock price meeting the minimum stock price threshold in the period following its IPO (Note 21-Subsequent Events). During the year ended December 31, 2010, the Company granted certain executive-level employees options to purchase 2,375, 1,150, 1,150...

  • Page 133
    ... 31, 2011 as a result of the Company's stock price meeting the minimum stock price thresholds in the period following its IPO (Note 21-Subsequent Events). As of December 31, 2010 there was approximately $1,512 of total RSPR compensation expense related to non-vested service-based restricted stock...

  • Page 134
    ....com brand, trademark and certain website names associated therewith, including LIVESTRONG.com. The Company used the license to build the LIVESTRONG.com website as the Company's anchor health and wellness media property. In consideration for the license, the Company agreed to pay LAF a one-time...

  • Page 135
    ... of 57%; and risk-free interest rate of 1.5%. Stock-based Compensation Expense Stock-based compensation expense related to all employee and non-employee stock-based awards was as follows: Year ended December 31, 2008 2009 2010 Stock-based compensation included in Service costs Sales and marketing...

  • Page 136
    ... December 31, 2010: Dividends-The Convertible Series A Preferred Stock, Convertible Series C Preferred Stock and Convertible Series D Preferred Stock were entitled to receive dividends on a pari passu basis, and out of any assets legally available when and if declared by the board of directors. The...

  • Page 137
    ...31, 2008, 2009 and 2010, respectively. If upon a liquidation, the assets to be distributed among the holders of preferred stock were insufficient to permit the payment to such holders of all accrued and unpaid preferred dividends, then the entire remaining assets of the Company legally available for...

  • Page 138
    ...Incorporation, increase in the number of authorized shares, declaration of dividends, the repurchase the Company's stock, an increase the number of shares reserved for issuance under stock plan approved by the Board of Directors, authorization of a liquidation of the Company or change the authorized...

  • Page 139
    ... the payments for the cost of registered names and prepaid registration fees were made to a single domain name registry, which is accredited by ICANN to be the exclusive registry for certain TLD's. The failure of this registry to perform its operations may cause significant short-term disruption to...

  • Page 140
    ... accounts receivable balance were as follows: 2009 2010 Advertising Network Partner A Advertising Network Partner B * 18. Business Combinations less than 10% as of or for the period 32% 22% * 33% The Company accounts for acquisitions of businesses using the purchase method of accounting...

  • Page 141
    ... (TheDailyPlate.com), a community-based website for nutrition and fitness enthusiasts for total purchase consideration of $5,037, including acquisition costs. The Daily Plate was owned and operated by four employees of the Company prior to the acquisition by the Company. The Company accounted for...

  • Page 142
    ... options held by Pluck employees at the time of acquisition (Note 13-Share-based Compensation Plans and Awards). As a result, the Company was obligated to pay in cash approximately $2,500 over the original vesting period of the stock option awards. Such amount is recorded as compensation expense...

  • Page 143
    ... generated outside of the United States is not material for any of the periods presented. Revenue derived from the Company's Content & Media and Registrar Services is as follows Year ended December 31, 2008 2009 2010 Revenue Content & Media revenue Owned & operated Network Total Content & Media...

  • Page 144
    ...024 11,250 63 1,374 19,065 1,302 32,667 4,732 13,024 11,250 63 1,749 The Company completed its initial public offering on January 31, 2011 whereby it received proceeds, net of underwriter discounts but before deducting offering expenses, of $81,817 from the issuance of 5,175 shares of common stock...

  • Page 145
    ...options to purchase 327 shares of common stock with a weighted average exercise price of $17.79 per share, and issued 87 restricted stock units. On February 23, 2011, the Company acquired CoveritLive, a company based in Toronto, Canada that provides social media services by powering live events with...

  • Page 146
    ... SEC on October 29, 2010) 4.02 4.03 10.01* Form of Indemnification Agreement entered into by and between Demand Media, Inc. and each of its directors and executive officers (incorporated by reference to Exhibit 10.01 to the Company's Amendment No. 2 to the Registration Statement on Form S-1 (File...

  • Page 147
    ... 2010) 10.15* Demand Media Inc. 2006 Equity Incentive Plan Restricted Stock Purchase Agreement, between Demand Media, Inc. and Richard Rosenblatt, dated April 19, 2007, amended April 27, 2007, amended further February 10, 2010 (incorporated by reference to Exhibit 10.15 to the Company's Registration...

  • Page 148
    ... 6, 2010) 10.24 Google Services Agreement, between Google, Inc. and Demand Media, Inc., dated May 28, 2010 (incorporated by reference to Exhibit 10.24 to the Company's Registration Statement on Form S-1 (File No. 333-168612) filed with the SEC on August 6, 2010) Credit Agreement, among Demand Media...

  • Page 149
    ... SEC on January 3, 2010) 10.30* Demand Media, Inc. 2006 Equity Incentive Plan Restricted Stock Purchase Agreement, between Demand Media, Inc. and Joanne Bradford, dated March 26, 2010 (incorporated by reference to Exhibit 10.30 to the Company's Amendment No. 5 to the Registration Statement on Form...

  • Page 150

  • Page 151
    .... FOUR: This Amended and Restated Certificate of Incorporation amends and restates the Restated Certificate of Incorporation to read as follows: ARTICLE I The name of the corporation is Demand Media, Inc. (the "Corporation"). ARTICLE II The address of the Corporation's registered office in the State...

  • Page 152
    ... hereafter provided by law, to adopt any such resolution or resolutions. The authority of the Board of Directors with respect to each series of preferred stock shall include, but not be limited to, determination of the following: (1) The number of shares constituting that series and the distinctive...

  • Page 153
    ... the Board of Directors already in office to Class I, Class II or Class III. At the first annual meeting of stockholders following the effectiveness of this Amended and Restated Certificate of Incorporation (the "Qualifying Record Date"), the term of office of the Class I directors shall expire and...

  • Page 154
    ... in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. (3) Subject to the rights of the holders of any series of Preferred Stock then outstanding, the Board of Directors or any individual director may be removed from office at any time for...

  • Page 155
    ... removal of such additional directors, shall forthwith terminate and the total authorized number of directors of the Corporation shall be reduced accordingly. B. (1) In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter...

  • Page 156
    ... any other enterprise as a director, officer, employee or agent at the request of the Corporation or any predecessor to the Corporation. C. Neither any amendment nor repeal of this Article VI, nor the adoption of any provision of the Corporation's Certificate of Incorporation inconsistent with this...

  • Page 157
    ... Demand Media, Inc. has caused this Amended and Restated Certificate of Incorporation to be executed by its duly authorized officers on this 28th day of January, 2011. DEMAND MEDIA, INC. By: /s/ Matthew P. Polesetsky Matthew P. Polesetsky Secretary DEMAND MEDIA, INC. AMENDED AND RESTATED CERTIFICATE...

  • Page 158
    Exhibit 3.02 AMENDED AND RESTATED BYLAWS OF DEMAND MEDIA, INC. (a Delaware corporation)

  • Page 159
    ... 3.11 POWERS NUMBER OF DIRECTORS ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS RESIGNATION AND VACANCIES PLACE OF MEETINGS; MEETINGS BY TELEPHONE REGULAR MEETINGS SPECIAL MEETINGS; NOTICE QUORUM BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING FEES AND COMPENSATION OF DIRECTORS REMOVAL OF...

  • Page 160
    ... DESIGNATION ON CERTIFICATES LOST CERTIFICATES CONSTRUCTION; DEFINITIONS DIVIDENDS FISCAL YEAR SEAL TRANSFER OF STOCK STOCK TRANSFER AGREEMENTS REGISTERED STOCKHOLDERS WAIVER OF NOTICE EVIDENCE OF AUTHORITY CERTIFICATE OF INCORPORATION RELIANCE UPON BOOKS, REPORTS AND RECORDS STOCKHOLDER RIGHTS...

  • Page 161
    ... OF DEMAND MEDIA, INC. ARTICLE I - CORPORATE OFFICES 1.1 REGISTERED OFFICE. The registered office of Demand Media, Inc. (the "Corporation") shall be fixed in the Corporation's certificate of incorporation, as the same may be amended from time to time. 1.2 OTHER OFFICES. The Corporation's board of...

  • Page 162
    .... To be timely, a stockholder's notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the one-year anniversary of the preceding year's annual meeting; provided...

  • Page 163
    ... from the underlying shares of the Corporation, (E) any performance related fees (other than an asset based fee) that such Proposing Person is entitled to based on any increase or decrease in the price or value of shares of any class or series of the Corporation, or any Synthetic Equity Interests or...

  • Page 164
    ... their names) in connection with the proposal of such business by such stockholder. (iv) For purposes of this Section 2.4, the term "Proposing Person" shall mean (i) the stockholder providing the notice of business proposed to be brought before an annual meeting, (ii) the beneficial owner or...

  • Page 165
    ... meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for notice of the meeting (in the case...

  • Page 166
    ... (ii)(a) of this Section 2.5 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation at the annual meeting is increased effective after the time period for which nominations would otherwise be due under paragraph (ii)(a) of this Section...

  • Page 167
    ... meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for notice of the meeting (in the case...

  • Page 168
    ... be a nominee for election as a director of the Corporation, the proposed nominee must deliver (in accordance with the time periods prescribed for delivery of notice under this Section 2.5) to the Secretary at the principal executive offices of the Corporation a written questionnaire with respect to...

  • Page 169
    ...States mail, postage prepaid, directed to the stockholder at his or her address as it appears on the Corporation's records; or (ii) if electronically transmitted as provided in Section 8.1 of these bylaws. An affidavit of the secretary or an assistant secretary of the Corporation or of the transfer...

  • Page 170
    ... at the stockholders' meeting is restricted to stockholders of record, persons authorized in accordance with Section 2.14 of these bylaws to act by proxy, and officers of the Corporation. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting...

  • Page 171
    ... applicable to the Corporation or its securities, be decided by the affirmative vote of the holders of a majority in voting power of the shares of stock of the Corporation which are present in person or by proxy and entitled to vote thereon. All voting, except on the election of directors and where...

  • Page 172
    ... tenth day before the meeting date), arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Corporation shall not be required to include electronic mail addresses or other electronic contact information on...

  • Page 173
    ...If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the...

  • Page 174
    ... by one or more resolutions adopted from time to time by a majority of the Board. No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires. 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS. Except as...

  • Page 175
    ... annual meeting of stockholders. 3.7 SPECIAL MEETINGS; NOTICE. Special meetings of the Board for any purpose or purposes may be called at any time by the chairperson of the Board, the chief executive officer, the president, the secretary or a majority of the authorized number of directors. Notice...

  • Page 176
    ... being adjudged legally incompetent by a court of competent jurisdiction. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director's term of office. ARTICLE IV - COMMITTEES 4.1 COMMITTEES OF DIRECTORS. The Board may...

  • Page 177
    ... committee, to the extent provided in the resolution of the Board or in these bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that...

  • Page 178
    ... officer, the president, to appoint, such other officers and agents as the business of the Corporation may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board may from time to time...

  • Page 179
    ...power of attorney or such other writing that authorizes the attorney or other agent so to act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in Delaware or at its principal executive office. 6.2 INSPECTION BY DIRECTORS. Any director...

  • Page 180
    ...certificate signed by, or in the name of the Corporation by the chairperson or vice-chairperson of the Board, or the president or vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the Corporation representing the number of shares registered...

  • Page 181
    ... have been entered in the stock records of the Corporation by an entry showing the names of the persons from and to whom it was transferred. 7.11 STOCK TRANSFER AGREEMENTS. The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more...

  • Page 182
    ...Restated Certificate of Incorporation of the Corporation, as amended and in effect from time to time. 7.16 RELIANCE UPON BOOKS, REPORTS AND RECORDS. To the fullest extent permitted by law, each director, each member of any committee designated by the Board, and each officer of the Corporation shall...

  • Page 183
    ... telecommunication, when directed to a number at which the stockholder has consented to receive notice; if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; if by a posting on an electronic network together with separate...

  • Page 184
    ... that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process. ARTICLE IX - INDEMNIFICATION 9.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Corporation shall indemnify...

  • Page 185
    ... CONTRACTS. The Board is authorized to enter into a contract with any director, officer, employee or agent of the Corporation, or any person serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other...

  • Page 186
    ... or advancement of expenses to an officer or director of the Corporation in effect prior to the time of such repeal or modification. ARTICLE X - AMENDMENTS In furtherance and not in limitation of the powers conferred by statute, the Board is expressly authorized to make, alter or repeal these...

  • Page 187
    ... Secretary of Demand Media, Inc., a Delaware corporation, and that the foregoing bylaws were amended and restated on September 27, 2010 by the Corporation's board of directors. IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 27th day of September, 2010. /s/ Matthew Polesetsky...

  • Page 188
    ...do not get a satisfactory response, you may contact the Legal Department directly. You may also report known or suspected violations of the Code on the Ethics Helpline that is available 24 hours a day, 7 days a week at a toll-free number posted in the Company's offices. You may also go to the Ethics...

  • Page 189
    ...discretion. Your supervisor, the Legal Department and the Company will protect your confidentiality to the extent possible, consistent with law and the Company's need to investigate your concern. It is Company policy that any employee or director who violates this Code will be subject to appropriate...

  • Page 190
    ...has received payments from the Company in the past year in excess of $120,000. If you are uncertain whether a particular company is a material customer or supplier, please contact the Legal Department for assistance. Conflict of interest issues concerning the Company's directors will be addressed by...

  • Page 191
    ... capacity. No employee may use corporate property, information or his or her position with the Company for personal gain or should compete with the Company while employed by us. You should disclose to your supervisor the terms and conditions of each business opportunity covered by this Code that you...

  • Page 192
    ...its suppliers. This means that our relationships with suppliers are based on price, quality, service and reputation, among other factors. Employees dealing with suppliers should carefully guard their objectivity. Specifically, no employee should accept or solicit any personal benefit from a supplier...

  • Page 193
    ... (such as Visa gift cards) be accepted or offered (other than in customary circumstances, such as weddings or funerals). It is your responsibility to use good judgment in this area. As a general rule, you may give or receive gifts or entertainment to or from customers or suppliers only to the...

  • Page 194
    ... policy, contact your supervisor or the Legal Department for additional guidance. For a more detailed discussion of special considerations applicable to dealing with the U.S., state, local and foreign governments, see "Interactions with the Government." COMPANY RECORDS Accurate and reliable records...

  • Page 195
    ...Company's business, financial condition and results of operations. Inaccurate, incomplete or untimely reporting will not be tolerated and can severely damage the Company and result in legal liability. The Company's principal financial officers and other employees working in the Accounting Department...

  • Page 196
    .... The Company may not agree with its competitors to raise, lower or stabilize prices or any element of price, including discounts and credit terms. Limitation of Supply. The Company may not agree with its competitors to limit its quantity or type of production or restrict the supply of its services.

  • Page 197
    ...behavior that can be construed as an attempt to monopolize. Boycott. The Company may not agree with its competitors to refuse to sell or purchase products or services from third parties. In addition, the Company may not prevent a customer from purchasing or using non-Company products or services. 10

  • Page 198
    ... to purchase. Price Discrimination. The Company may under some circumstances be prohibited from charging similarly situated customers different prices for the same good or service. Consult with the Legal Department before undertaking any such pricing programs. Meetings with Competitors Employees...

  • Page 199
    ... above, the Company's pricing policies or other competitive terms, plans for new or expanded products, services or facilities or any other proprietary, competitively sensitive information. Seeking Help Violations of antitrust laws carry severe consequences and may expose the Company and employees to...

  • Page 200
    ..., institutional investors and other investment advisors. You are required to read carefully and comply with our Policy Statement Containing Guidelines for Corporate Disclosures, as amended from time to time. Please inform your supervisor or the Legal Department if you do not have a copy of our...

  • Page 201
    ... and comply with such applicable laws. These employees are expected to have a working knowledge of the laws and regulations applicable to their job positions. Questions and requests for assistance should be directed to the Legal Department. The Company is also subject to U.S. anti-boycott laws...

  • Page 202
    ...who receives a report of alleged harassment or discrimination is required to report it to the Human Resources Department immediately. Alcohol and Drugs The Company is committed to maintaining a drug-free work place. All Company employees must comply strictly with Company policies regarding the abuse...

  • Page 203
    ... the Legal Department, or you may raise any issues with the Ethics Helpline at a toll-free number posted in the Company's offices or at the Ethics Helpline's website. The Company expects all of its employees and directors to adhere to these standards. This Code, as applied to the Company's principal...

  • Page 204
    ..., Inc. Dagnabit, Inc. Demand Media (Netherlands) B.V., a private llc Demand Media Sweden AB DM UK Limited Domain Rouge, Inc. Domainnovations, Inc. Dropoutlet, Inc. eNom Canada Corp. eNom Corporate, Inc. eNom GMP Services, Inc. eNom World, Inc. eNom, Incorporated eNoml, Inc. eNom 1008, Inc. eNom1009...

  • Page 205
    ... eNom652, Inc. eNom654, Inc. eNom655, Inc. eNom656, Inc. eNom659, Inc. eNom661, Inc. eNom662, Inc. eNom663, Inc. eNom666, Inc. eNom672, Inc. enomal, Inc. eNomAte, Inc. eNomAU, Inc. Nevada Nevada Nevada Nevada Nevada Nevada Nevada Nevada Nevada Nevada Nevada Nevada Nevada Nevada Nevada Nevada Nevada...

  • Page 206
    ... and Certs, Inc. SssassS, Inc. The Internet Chef Inc. Traffic Names, Inc. Travel Domains, Inc. Vedacore, Inc. Whiteglove Domains, Inc. Whois Privacy Protection Services Inc. Demand Media (Ireland) Limited Nevada Nevada Nevada Nevada Nevada Nevada Nevada Nevada Nevada Nevada Nevada Nevada Nevada...

  • Page 207
    QuickLinks Exhibit 21.01 Subsidiaries of Demand Media, Inc.

  • Page 208
    ...this document Exhibit 23.01 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-172371) of Demand Media, Inc. of our report dated February 28, 2011 relating to the financial statements, which...

  • Page 209
    QuickLinks Exhibit 23.01 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  • Page 210
    ...this document Exhibit 31.01 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Richard M. Rosenblatt, certify that: 1. 2. I have reviewed this Annual Report on Form 10-K of Demand Media, Inc.; Based on my knowledge, this report does not contain any...

  • Page 211
    QuickLinks Exhibit 31.01 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

  • Page 212
    ... this document Exhibit 31.02 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Charles S. Hilliard, certify that: 1. 2. I have reviewed this Annual Report on Form 10-K of Demand Media, Inc.; Based on my knowledge, this report does not contain any...

  • Page 213
    QuickLinks Exhibit 31.02 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

  • Page 214
    ...Exhibit 32.01 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K for the fiscal year ended December 31, 2010 of Demand Media, Inc. (the "Company") as filed...

  • Page 215
    QuickLinks Exhibit 32.01 CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

  • Page 216
    ... amended; and The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ CHARLES S. HILLIARD Charles S. Hilliard President and Chief Financial Officer (Principal Financial Officer) Date: March 1, 2011 This...

  • Page 217
    QuickLinks Exhibit 32.02 CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002