Here's the Big IPO You've Been Waiting For: Demand Media Files With the SEC

Fun weekend reading for the tech and media set: Demand Media’s S-1 filing, the first step it will take on the road to a public offering.

The S-1 doesn’t include lots of important information, like the amount of money Santa Monica, Calif.-based Demand–its CEO Richard Rosenblatt is pictured here–intends to raise* or the value it thinks it can get from Wall Street. UPDATE: Missed this in the first pass — the filing says the company could raise $125 million — a “proposed maximum offering price”.

But given that it’s the first time the private company has given the outside world a peek at its numbers, there is plenty in there to chew on, and I’ll be looking at it as long as my battery holds up this afternoon. (That was quick! All done for now, more later.)

First things first: Running a content farm, or factory, or whatever you’d like to call it is a big business. But it’s not profitable yet. Demand has generated revenue of $114 million this year and lost $22 million. Almost all of the money is coming from traffic, and advertising, that it generates from Yahoo (YHOO) and Google (GOOG)–Google in particular. The search engine accounts for 26 percent of Demand’s revenue (click image to enlarge).

More on the Google relationship, which appears to be tied to specific agreements that sunset over the next two years:

We use Google for cost-per-click advertising and search results on our owned and operated websites and on our network of customer websites, and receive a portion of the revenue generated by advertisements provided by Google on those websites. Our Google cost-per-click agreement for our developed websites, such as eHow, expires in the second quarter of 2012 and our Google cost-per-click agreement for our undeveloped websites expires in the first quarter of 2011. In addition, we also engage Google’s DoubleClick ad-serving platform to deliver advertisements to our developed websites and have another revenue-sharing agreement with respect to revenue generated by our content posted on Google’s Youtube.com, both of which are currently on year to year terms that expire in the fourth quarter of 2010.

As previously reported by the Financial Times, Goldman Sachs (GS) is leading the offering, followed by most of the big players who have been salivating for this: Morgan Stanley* (MS), Allen & Co, etc.

Here’s Demand’s Rosenblatt explaining the business in his own words in an interview with BoomTown’s Kara Swisher at the D8 conference:

*I had previously reported that JP Morgan was involved in the offering. My apologies.