Enom 2013 Annual Report Download - page 84

Demand Media, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Company Background and Overview
Demand Media, Inc. (“Demand Media”) , together with its consolidated subsidiaries (the “Company”) is a Delaware corporation
headquartered in Santa Monica, California. Our business is focused on an Internet-based model for the professional creation of content, and is
comprised of two service offerings, Content & Media and Registrar.
Content & Media
Our content & media service offering includes an online content creation s tudio with a large community of freelance creative
professionals, a portfolio of leading owned and operated websites, and a digital artist marketplace and e-commerce platform. Content & Media
services are delivered through our Content & Media platform, which includes our 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.
We also leverage our content creation studio for third-party brands, publishers and advertisers as part of our content solutions service offering.
As a complement to our traditional content offerings, we have recently integrated certain e-commerce and paid content offerings. In June 2013,
we acquired Society6, LLC (“Society6”), a digital artist marketplace and e-commerce platform that enables a large community of talented artists
to sell their original designs on art prints, phone cases, t-shirts and other products. We have also recently begun to offer certain on-demand
services for purchase on an a la carte or subscription basis, such as eHow Now, a platform where customers chat directly with experts to receive
advice and guidance.
Registrar
Our Registrar service offering provides domain name registration and related value added service subscriptions to third parties through
our wholly owned subsidiaries, eNom and Name.com. We are also a significant participant in the Internet Corporation for Assigned Names and
Numbers' ("ICANN") significa
nt expansion of the number of available generic Top Level Domain (“gTLDs”), with the first new gTLDs being
delegated in October 2013 ("New gTLD Program"). As part of the the New gTLD Program, our domain services business entered into its first
registry agreements with ICANN and became an accredited registry for new gTLDs, and eNom and Name.com also entered into contracts
necessary to participate in the New gTLD Program. In the fourth quarter of 2013, we began providing back-end domain name registry and
related services for gTLDs owned by a third party domain name registry and we launched operations for our own gTLDs in the first quarter of
2014.
Our wholly owned subsidiary, Rightside Group, Ltd. (“Rightside”), filed a Registration Statement on Form 10 with the SEC in January
2014, which Rightside amended in February 2014, in connection with the planned separation of the Company into two independent, publicly
traded companies: a pure-play Internet-based content and media company and a pure-play domain name se rvices company (hereinafter referred
to as the “Proposed Business Separation”). Upon completion of the Proposed Business Separation, Rightside will operate the domain name
services business, while we will continue to own and operate our content and media business. The Proposed Business Separation is being
structured as a pro rata distribution of Rightside shares to holders of our common stock (the “Distribution”). Consummation of the Proposed
Business Separation is subject to final approval by our board of directors which may, in its absolute and sole discretion, decide at any time prior
to the Distribution not to proceed with the Proposed Business Separation or to change any of the terms related to the Proposed Business
Separation or the Distribution. Consummation of the Proposed Business Separation is also subject to the satisfaction of several conditions,
including receipt of a private letter ruling from the Internal Revenue Service, together with an opinion of our tax counsel, substantially to the
effect that, among other things, the Proposed Business Separation will qualify as a transaction that is tax-free for U.S. federal income tax
purposes under Section 355 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended, having the Registration Statement on Form 10
declared effective by the SEC and receipt of listing approval. We received the private letter ruling from the Internal Revenue Service (“IRS”) on
January 31, 2014. We have not yet finalized all of the details of the Proposed Business Separation.
Initial Public Offering
In January 2011, we completed our initial public offering whereby we received proceeds, net of underwriters discounts but before
deducting offering expenses, of $81.8 million from the issuance of 5.2 million shares of common stock. As a result of the initial public offering,
all shares of our convertible preferred stock converted into 61.7 million shares of common stock and warrants to purchase common stock or
convertible preferred stock net exercised into 0.5 million shares of common stock.
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