Demand Media Acquires Society6

  Demand Media Acquires Society6

Fast Growing E-Commerce Marketplace Connecting Artists with Consumers Expands
                   Demand Media’s Content & Media Platform

                 Company Updates Second Quarter 2013 Outlook

Business Wire

SANTA MONICA, Calif. -- June 24, 2013

Demand Media® (NYSE: DMD) today announced that it has acquired Society6, a
leading digital marketplace powered by artists. The e-commerce marketplace
enables artists to seamlessly upload and merchandise unique artwork and sell a
variety of products, such as phone cases, art prints, home décor, and other
merchandise. Society6 further expands Demand Media’s content & media platform
through Society6’s fast growing e-commerce marketplace that includes more than
100 million product SKUs and a community of over 300,000 members.

Total consideration is approximately $94 million, consisting of $75 million in
cash and approximately $19 million in common stock at close.

“Society6 augments and diversifies our content & media platform by adding an
innovative e-commerce marketplace with multiple traffic sources and a large
community of talented artists. This acquisition will significantly accelerate
the scale of our e-commerce business as we continue to expand into new revenue
models,” said Richard Rosenblatt, Chairman and CEO, Demand Media.

Rosenblatt added, “We intend to expand Society6 by offering their unique
marketplace to our existing media audience of over 100 million unique global
visitors per month. In addition, we plan to leverage our expertise in managing
content creation platforms, our experience in building creator communities,
and our significant engineering and product resources to further drive
Society6’s scale and growth.”

“Our team is excited to join Demand Media because they understand the
importance of content creators and will help expand our community of artists
and our audience,” said Justin Cooper, co-Founder, Society6. “We are looking
forward to benefitting from Demand Media’s expertise to accelerate the success
of our marketplace.”

About Society6

Founded in 2009 in Los Angeles, CA, Society6 is a rapidly growing online
marketplace powered by hundreds of thousands of artists from around the world.
Society6’s commerce platform enables artists to easily upload and immediately
offer their art for sale as art prints, iPhone cases, home décor, t-shirts and
a variety of other high quality products - without giving up the rights to
their work. Society6 produces these products on-demand, using only the highest
quality materials and processes and then delivers them to consumers worldwide
on behalf of the artist.

Further Transaction Detail

For the twelve months ended December 31, 2012, Society6 reported approximately
$15 million and $4 million in revenue and operating income (unaudited),
respectively. A slide presentation with an overview of Society6’s business and
additional details regarding this transaction can be viewed on Demand Media’s
investor relations website at ir.demandmedia.com.

Updated Demand Media Business Outlook

Demand Media is updating its previous outlook for the second quarter of 2013,
issued May 7, 2013 as follows:

Demand Media expects revenue to be in the range of $100.0 million to $101.0
million, and revenue ex-TAC to be in the range of $95.5 million to $96.5
million, due to a reduction in search engine referral traffic to its Owned &
Operated sites in May and June 2013. The Company expects Adjusted EBITDA to be
in the range of $26.0 million to $27.0 million. The Company is reaffirming its
expectation for Adjusted Earnings Per Share in the range of $0.08 to $0.09.
The Company expects the weighted average diluted share count to be 88.0
million to 89.0 million.

The Company is not updating or reaffirming its full year 2013 outlook at this
time and plans to discuss its full year outlook, including the impact of the
Society6 acquisition and the recent reduction in search engine referral
traffic to its Owned & Operated sites, when it reports second quarter 2013
results.

About Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and
presented in accordance with accounting principles generally accepted in the
United States of America (“GAAP”), we use certain non-GAAP financial measures
described below. The presentation of this additional financial information is
not intended to be considered in isolation or as a substitute for, or superior
to, the financial information prepared and presented in accordance with GAAP.
For more information on these non-GAAP financial measures, please see the
tables captioned “Reconciliation of Non-GAAP Measures to Unaudited
Consolidated Statements of Operations” included at the end of this release.

The non-GAAP financial measures presented in this release are the primary
measures used by the Company's management and board of directors to understand
and evaluate its financial performance and operating trends, including period
to period comparisons, to prepare and approve its annual budget and to develop
short and long term operational plans. Additionally, Adjusted EBITDA is the
primary measure used by the compensation committee of the Company's board of
directors to establish the funding targets for and fund its annual bonus pool
for the Company's employees and executives. We believe our presented non-GAAP
financial measures are useful to investors both because (1) they allow for
greater transparency with respect to key metrics used by management in its
financial and operational decision-making and (2) management frequently uses
them in its discussions with investors, commercial bankers, securities
analysts and other users of its financial statements.

Revenue ex-TAC is defined by the Company as GAAP revenue less traffic
acquisition costs (TAC). TAC comprises the portion of Content & Media GAAP
revenue shared with the Company's network customers. Management believes that
Revenue ex-TAC is a meaningful measure of operating performance because it is
frequently used for internal managerial purposes and helps facilitate a more
complete period-to-period understanding of factors and trends affecting the
Company's underlying revenue performance of its Content & Media service
offering.

Adjusted earnings before interest, taxes, depreciation and amortization
(Adjusted EBITDA) is defined by the Company as net income (loss) before income
tax expense, other income (expense), interest expense (income), depreciation,
amortization, stock-based compensation, as well as the financial impact of
acquisition and realignment costs, the formation expenses directly related to
its gTLD initiative, and any gains or losses on certain asset sales or
dispositions. Acquisition and realignment costs include such items, when
applicable, as (1) non-cash GAAP purchase accounting adjustments for certain
deferred revenue and costs, (2) legal, accounting and other professional fees
directly attributable to acquisition activity, (3) employee severance payments
attributable to acquisition or corporate realignment activities, and (4)
expenditures related to the separation of Demand Media into two distinct
publicly traded companies. Management does not consider these expenses to be
indicative of the Company's ongoing operating results or future outlook.

Management believes that these non-GAAP financial measures reflect the
Company's business in a manner that allows for meaningful period-to-period
comparisons and analysis of trends. In particular, the exclusion of certain
expenses in calculating Adjusted EBITDA can provide a useful measure for
period to period comparisons of the Company's underlying recurring revenue and
operating costs, which is focused more closely on the current costs necessary
to utilize previously acquired long-lived assets. In addition, management
believes that it can be useful to exclude certain non-cash charges because the
amount of such expenses is the result of long-term investment decisions in
previous periods rather than day-to-day operating decisions. For example, due
to the long-lived nature of a majority of its media content, the revenue
generated by the Company's media content assets in a given period bears little
relationship to the amount of its investment in media content in that same
period. Accordingly, management believes that content acquisition costs
represent a discretionary long-term capital investment decision undertaken at
a point in time. This investment decision is clearly distinguishable from
other ongoing business activities, and its discretionary nature and long-term
impact differentiate it from specific period transactions, decisions regarding
day-to-day operations, and activities that would have an immediate impact on
operating or financial performance if materially changed, deferred or
terminated.

Adjusted Earnings Per Share is defined by the Company as Adjusted Net Income
divided by the weighted average number of shares outstanding. Adjusted Net
Income is defined by the Company as net income (loss) before the effect of
stock-based compensation, amortization of intangible assets acquired via
business combinations, accelerated amortization of intangible assets removed
from service, acquisition and realignment costs, the formation expenses
directly related to its gTLD initiative, and any gains or losses on certain
asset sales or dispositions, and is calculated using the application of a
normalized effective tax rate. Acquisition and realignment costs include such
items, when applicable, as (1) non-cash GAAP purchase accounting adjustments
for certain deferred revenue and costs, (2) legal, accounting and other
professional fees directly attributable to acquisition activity, (3) employee
severance payments attributable to acquisition or corporate realignment
activities, and (4) expenditures related to the separation of Demand Media
into two distinct publicly traded companies. Management does not consider
these expenses to be indicative of the Company's ongoing operating results or
future outlook.

Management believes that Adjusted Net Income and Adjusted Earnings Per Share
provide investors with additional useful information to measure the Company's
underlying financial performance, particularly from period to period, because
these measures are exclusive of certain non-cash expenses not directly related
to the operation of its ongoing business (such as amortization of intangible
assets acquired via business combinations, as well as certain other non-cash
expenses such as purchase accounting adjustments and stock-based compensation)
and include a normalized effective tax rate based on the Company's statutory
tax rate.

The use of these non-GAAP financial measures has certain limitations because
they do not reflect all items of income and expense, or cash flows that affect
the Company's operations. An additional limitation of these non-GAAP financial
measures is that they do not have standardized meanings, and therefore other
companies may use the same or similarly named measures but exclude different
items or use different computations. Management compensates for these
limitations by reconciling these non-GAAP financial measures to their most
comparable GAAP financial measures within its financial press releases.
Non-GAAP financial measures should be considered in addition to, not as a
substitute for, financial measures prepared in accordance with GAAP. Further,
these non-GAAP financial measures may differ from the non-GAAP financial
information used by other companies, including peer companies, and therefore
comparability may be limited. We encourage investors and others to review our
financial information in its entirety and not rely on a single financial
measure. The accompanying tables have more details on the GAAP financial
measures and the related reconciliations.

About Society6

Founded in 2009 in Los Angeles, CA, Society6 is a rapidly growing online
marketplace powered by hundreds of thousands of artists from around the world.
Society6’s commerce platform enables artists to easily upload and immediately
offer their art for sale as art prints, iPhone cases, home décor, t-shirts and
a variety of other high quality products - without giving up the rights to
their work. Society6 produces these products on-demand, using only the highest
quality materials and processes and then delivers them to consumers worldwide
on behalf of the artist.

About Demand Media

Demand Media, Inc. (NYSE: DMD) is a leading digital media and domain services
company that informs and entertains one of the internet’s largest audiences,
helps advertisers find innovative ways to engage with their customers and
enables publishers, individuals and businesses to expand their online
presence. Headquartered in Santa Monica, CA, Demand Media has offices in North
America, South America and Europe. For more information about Demand Media,
please visitwww.demandmedia.com

Cautionary Information Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995, as amended. These forward-looking statements involve risks and
uncertainties regarding the Company's future financial performance, and are
based on current expectations, estimates and projections about our industry,
financial condition, operating performance and results of operations,
including certain assumptions related thereto. Statements containing words
such as guidance, may, believe, anticipate, expect, intend, plan, project,
projections, business outlook, and estimate or similar expressions constitute
forward-looking statements. Actual results may differ materially from the
results predicted, and reported results should not be considered an indication
of future performance. Potential risks and uncertainties include, among
others: our ability to complete a separation of our business into two separate
public companies as previously announced and unanticipated developments that
may delay or negatively impact such a transaction; the possibility that we may
decide not to proceed with the separation of our business as previously
announced if we determine that alternative opportunities are more favorable to
our stockholders; the possibility that we decide to separate our business in a
manner different from that previously disclosed; the impact and possible
disruption to our operations from pursuing the previously announced separation
transaction; our ability to retain key personnel; the high costs we will
likely incur in connection with such a separation transaction, which we would
not be able to recoup if such a transaction is not consummated; the
expectation that the previously announced separation transaction will be
tax-free; revenue and growth expectations for the two independent companies
following the separation of our business; the ability of each business to
operate as an independent entity upon completion of such a transaction;
changes in the methodologies of internet search engines, including ongoing
algorithmic changes made by Google as well as possible future changes, and the
impact such changes may have on page view growth and driving search related
traffic to our owned and operated websites and the websites of our network
customers; changes in our content creation and distribution platform,
including the possible repurposing of content to alternate distribution
channels, reduced investments in intangible assets or the sale or removal of
content; our ability to effectively integrate, manage, operate and grow a
crowd-sourced e-commerce website such as Society6; our ability to manage risks
associated with the sale of goods over the internet; our ability to
successfully launch, produce and monetize new content formats; the inherent
challenges of estimating the overall impact on page views and search driven
traffic to our owned and operated websites based on the data available to us
as internet search engines continue to make adjustments to their search
algorithms; our ability to compete with new or existing competitors; our
ability to maintain or increase our advertising revenue; our ability to
continue to drive and grow traffic to our owned and operated websites and the
websites of our network customers; our ability to effectively monetize our
portfolio of content; our dependence on material agreements with a specific
business partner for a significant portion of our revenue; future internal
rates of return on content investment and our decision to invest in different
types of content in the future, including premium video and other formats of
text content; our ability to attract and retain freelance creative
professionals; changes in our level of investment in media content
intangibles; the effects of changes or shifts in internet marketing
expenditures, including from text to video content as well as from desktop to
mobile content; the effects of shifting consumption of media content from
desktop to mobile; the effects of seasonality on traffic to our owned and
operated websites and the websites of our network customers; the impact of
seasonality on our e-commerce business; intense competition, which could lead
to pricing pressure among other effects; our ability to expand our customer
base and meet production requirements; our ability to develop additional
adjacent lines of business to complement our growth strategies; our ability to
continue to add partners to our registrar platform on competitive terms; our
ability to successfully pursue and implement our gTLD initiative; changes in
stock-based compensation; changes in amortization or depreciation expense due
to a variety of factors; potential write downs, reserves against or impairment
of assets including receivables, goodwill, intangibles (including media
content) or other assets; changes in tax laws, our business or other factors
that would impact anticipated tax benefits or expenses; our ability to
successfully identify, consummate and integrate acquisitions; our ability to
retain key customers and key personnel; risks associated with litigation; the
impact of governmental regulation; and the effects of discontinuing or
discontinued business operations. From time to time, we may consider
acquisitions or divestitures that, if consummated, could be material. Any
forward-looking statements regarding financial metrics are based upon the
assumption that no such acquisition or divestiture is consummated during the
relevant periods. If an acquisition or divestiture were consummated, actual
results could differ materially from any forward-looking statements. More
information about potential risk factors that could affect our operating and
financial results are contained in our annual report on Form 10-K for the
fiscal year ending December 31, 2012 filed with the Securities and Exchange
Commission (http://www.sec.gov) on March 5, 2013, and as such risk factors may
be updated in our quarterly reports on Form 10-Q filed with the Securities and
Exchange Commission, including, without limitation, information under the
captions Risk Factors and Management's Discussion and Analysis of Financial
Condition and Results of Operations.

Furthermore, as discussed above, the Company does not intend to revise or
update the information set forth in this press release, except as required by
law, and may not provide this type of information in the future.

Contact:

Demand Media
Media Contact:
Jean Lin, 310-319-6854
Jean.Lin@demandmedia.com
or
Investor Contact:
Julie MacMedan, 310-917-6485
Julie.MacMedan@demandmedia.com
 
Press spacebar to pause and continue. Press esc to stop.