In a sign that the Internet IPO market might be heating up again, two high-profile web companies filed registration statements in the past week. First to the trough was Demand Media, a web registrar and content provider, with an anticipated $125 million offering. On Monday, ubiquitous VoIP provider Skype also filed to go public in a deal valued at $100 million.
Pretty much everyone in the world knows who Skype is. The Skype name has almost become a verb in the modern lexicon. The company claims that its 124 million users have placed 95 billion calling minutes in 2010 alone. That's a ton of talk time. On top of that, the company is now profitable.
Less well known (at least by name) is Demand Media. [Full disclosure: I have written on occasion for two of Demand Media's partner sites.] Be that as it may, Demand Media stands to become the first $1 billion tech company to IPO since Google. Not bad for a company widely considered to be a low-quality content mill.
So which one is the better bet? Hard to say, really. Skype is profitable; Demand is not. Skype is an Internet communications juggernaut; Demand claims to have cracked Google's search algorithm. Skype has real overhead; Demand pays slave wages. Here's an interesting comparison of the two by BNET.
The one thing I find most interesting about both companies is what they represent going forward, which is the death of old business models. How many of you even have a home phone (landline) any more? The phone companies are struggling mightily to stay afloat amid a sea of customers shutting off their service to rely solely on cell phone service and Skype.
As for Demand Media, the traditional publishing industry is meeting a decidedly undignified demise. Publishers aren't innovating to capitalize on changes in the market, they're fighting tooth and nail to maintain the status quo. Sadly (for them) this is the height of futility. Ebooks are overtaking "tree-books", advertisers are bailing out of high-priced print ads in favor of highly-targeted online ads, and rates for freelance writers are plummeting (a sad fact I am well aware of). Demand Media might be worth a billion; Newsweek just sold for a buck.
After watching the Tesla IPO, I'm inclined to think the market might be ready for these IPO's. Skype is the sizzle, Demand is the steak. Both companies are disruptive and willing to innovate. I'm guessing they'll both do well. But if Google ever monkeys with their 11 herbs and spices, Demand might have a real problem on their hands. At least Skype doesn't have to crack anyone's code...
skype sucks as an IPO, short immediately
Google's got a few billion in cash, why not buy both pre IPO.
Yeah, Google is gunning for some acquisitions. According to Eric Schmidt, "The opportunities are there. We can afford it."
http://www.bendbulletin.com/apps/pbcs.dll/article?AID=/20100812/NEWS010…
Some fine points, Uncle. I think the publishing industry has a lot of the same vanity based misconceptions as the American automotive industry. Essentially, the notion that they are so tried and true nothing new can "dethrone" them. If I was an optometrist I'd be a big e-book fan, that shit is definitely going to lead to more "Glasses Per Capita" and boost my profits.
Here's a related article on Barnes & Noble which, I believe, ties in well.
Isn't skype in a battle to keep its name. Apparently sky thinks its name is to similar to its own and the EU agrees which will delay its ipo
i thought skype is owned by ebay
Edmundo, I think the internet market is already hot and will get much hotter in the coming months. Take a look at makemytrip, they priced last night at the top of their rangeand are up 70% right now. I think Demand will do quite well, as they are a pioneer in their space and have a great customer base. I think Demand has a leading position in a space that will inevitably only grow from here on out.
Also here is the news story
http://www.reuters.com/article/idUSLDE6790LP20100810
Eddie, dig the post. Good stuff. Glad you're paying attention to this stuff. Your conclusions feel inherently correct, but I would say I really don't think Google is too worried about Demand. Demand doesn't compete with Google in any of its big businesses -- they are simply a content production house, as you said. Their biz has proved scalable -- and it's really not surprising that tons of clones are popping up. Evidence of a good idea. Look at AOL -- they're creating websites by the minute, quite a few big web entities are vying for control of market share. Demand seems to be winning at this point, b/c they are a sweat shop. But Google is really focusing on mobile ... with AT&T likely losing the iPhone, Verizon stands to gain categorically ... which will then compete with Android ... Google is worrying about net neutrality and their biggest biz ... advertising ... i really don't think they give a f*ck abt Demand. So, Demand has a potentially infinitely scalable biz, and they could become the Walmart of content production. And meanwhile, Skype is having trouble getting users to pay, they're settling up litigation w/ founders, and they have to find new revenue streams -- advertising, most likely. You are right that these are exciting "New Media" biz models, but the fact of the matter is that they're still wrestling w/ a lot of the same issues Old Media was ... Basically, I think Skype has the better long-term biz, but short term, it's all about Demand.
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