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Greenberg: A Google Crackdown at Demand Media?

Friday, 21 Jan 2011 | 4:49 PM ET

Demand Media’s upcoming IPO has been generating quite a buzz, including a recent piece by yours truly.

Demand Media
Demand Media
Demand Media

If it comes next week as planned, Demand may be the first $billion-plus Internet IPO since Google.

As a refresher, if you don't know demand, you may know some of its 500,000 websites.

Among them: ehow.com, Lance Armstrong's livestrong.com, golflink.com, trails.com and cracked.com.

But as I’ve reported,there are a bunch of red flags flying over this deal, including:

  • Insiders selling on the deal—never a good sign.
  • Controversy over the way Demand accounts for content.
  • And a heavy reliance on Google for ad revenue.

And it's that Google tie that gives this story a new twist.

To some, Demand is really nothing more than a content farm—a term used to describe sites that have a lower-quality of content—the type that pops up on multiple sites when you do a Google search.

Enter this post today from Google's principal engineer Matt Cutts on Google’s official blog.

Wrote Cutts: “As ‘pure webspam’ has decreased over time, attention has shifted instead to ‘content farms,’ which are sites with shallow or low-quality content. In 2010, we launched two major algorithmic changes focused on low quality sites. Nonetheless, we hear the feedback from the web loud and clear: people are asking for even stronger action on content farms and sites that consist primarily of spammy or low-quality content. We take pride in Google search and strive to make each and every search perfect. The fact is that we’re not perfect, and combined with users’ skyrocketing expectations of Google, these imperfections get magnified in perception. However, we can and should do better.”

Herb Alert: Demand Media
If Demand Media comes out next week, it may be the first Internet company IPO with a $1 billion plus valuation since Google, with CNBC's Herb Greenberg.

In other words, it appears Google is cracking down on content farms.

While Cutts didn't mention any names, a Google crackdown would mean fewer pages that pop up for the likes of Demand when you do a search, which would translate into less ad revenue for Demand.

Talking about content farms in general, Danny Sullivan, editor of searchengineland.com, told me that any crackdown by Google could “starve” content farms “of oxygen.” The question, he says, is where Google would draw the line on high versus low quality. “We don’t know where Demand is within that scale.”

Google has to be careful—and this is where it could get interesting: Fewer ads placed by Google, as you go down the daisy chain, also means less revenue for Google, whose AdSense places ads on Demand's site.

My take: Both lose, but what may amount to a drop in the bucket for Google would be a bucket of cement for Demand. Stay tuned.

Questions? Comments? Write to HerbOnTheStreet@cnbc.com

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