Where Did Demand Media's Profits Go?

When Richard Rosenblatt talks, we listen. The man who once served as the former chief of MySpace creator Intermix Media heads one of the most heavily funded and high-profile venture-backed companies, Demand Media Inc.

Since co-founding the company in 2006, he’s built a big business with an audacious and controversial strategy to create thousands of niche content sites targeted at search engines, and to buy millions of generic Web sites with highly-trafficked domain names. In multiple interviews with various publications over the past couple of years, Rosenblatt stated that Demand Media is profitable and suggested that revenue reached about $200 million in 2009. We took his word for it, as we’re forced to do with privately held companies.

So when Demand Media filed for an IPO on Friday, we eagerly poured through the 187-page filing–only to find that while the company’s revenue last year was close to $200 million, its bottom line was deep in the red.

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