Demand Media (DMD) $113 million IPO with a market capitalization of $1.2 billion at the price range mid-point of $15. Scheduled for Wednesday, January 26, 2011

OVERVIEW

17th largest web property in the United States. Attracted over 105 million unique visitors with over 679 million page views globally.

Growth from content generation & distribution. 13,000 contributors

VALUATION

. $1.2 billion market capitalization is 258 times annualized expected December quarter income, 4.2 times sales

. Valuation is high but so is the sequential growth rate in sales & earnings . Appears to be successfully implementing the content aggregation/distribution model better than Yahoo or AOL . If the growth rate continues DMD, may seem overvalued for the foreseeable future based on standard valuation metrics.

Quarterly results	Sep-09	Dec 2009	March 2010	June 2010	Sept, 2010	Dec, 2010*
Revenues ($mm)	$52	$55	$54	$60	$65	$73
Gross margin % of rev	43%	43%	44%	48%	49%
Operating income	-$3.5	-$3.2	-$3.2	-$1.0	$0.9
Net loss	-$4.1	-$4.0	-$4.1	-$1.9	-$0.3	$1.2
						*estimate

See financials at end

LARGE, GROWING AUDIENCE

. DMD’s platform serves a large and growing audience. According to comScore, for the month ended November 30, 2010, DMD’s owned and operated websites comprised the 17th largest web property in the United States and DMD attracted over 105 million unique visitors with over 679 million page views globally. . DMD’s reach is further extended through over 375 websites operated by customers where DMD deploys one or more features of its platform. . These customer websites generated over 1 billion page views to DMD’s platform during the month ended November 30, 2010, according to internal data.

December quarter estimate

. Revenue up to $73mm . Impressive sequential quarterly revenue growth . Content & distribution % of revenue climbed to 63% . Expects to be profitable for the first quarter in DMD’s history

CONTENT

As of December 31, 2010, DMDs content studio had approximately 13,000 freelance content creators, and during the year ended December 31, 2010, it generated approximately 2 million text articles and videos. . DMD believes that the volume of output from its content studio makes us one of the world's most prolific producers of professional online content.

WHOLESALE REGISTRAR

Registrar Revenue principally comprised of registration fees charged to resellers and consumers in connection with new, renewed and transferred domain name registrations. In addition, DMD’s Registrar also generates revenue from the sale of other value-added services that are designed to help customers easily build, enhance and protect their domains, including security services, e-mail accounts and web-hosting

Expects declines in average revenue per domain

Beginning in the second quarter of 2010 and extending through early 2011, expects modest declines in average revenue per domain as a result of recently attracting certain large volume customers, from which DMD has only begun to recognize revenue, and as a result of more aggressive pricing.

COMPETITION

Content & Media

Principal competitors in this space include traditional Internet companies like Yahoo! and AOL, both of whom are making significant investments in order to compete with aspects of DMD’s business.

. In 2010, Yahoo! acquired Associated Content, an online publisher and distributor of original content. Associated Content allows anyone, both paid and non-paid content creators, to publish content in any format, and connects the content to consumers, partners and advertisers. . In 2009, AOL launched Seed, a content and media platform that helps create online content for distribution across all of AOL's properties.

. Additionally, competes with web portals that focus on particular areas of consumer interest such as Glam, WebMD and About.com for online audiences and marketing budgets. . With respect to social media tools competes with several private companies such as Jive Software and KickApps. However, we believe, we compare favorably with these companies with respect to breadth of product features, flexibility of integration and scale of customer usage.

Competes for four main constituents

• Consumers. We compete to attract and retain users of our content by offering them the most relevant, high-quality, targeted information.

• Content Creators. We compete to attract and retain the top freelance writers, filmmakers and copy editors by offering them competitive payments for their services and the ability to pursue a large volume of titles in the topic categories that most interest them. • Website Publishers. We compete to attract and retain content publishers by offering licensed access to the most relevant content developed specifically for their target audience. • Advertisers. We compete to attract and retain advertisers by giving them access to the most relevant and targeted audiences for their products or services.

Registrar

Principal competitors include existing registrars, such as GoDaddy, Tucows and Melbourne IT, and new registrars entering the domain name registration business.

USE OF PROCEEDS

$56mm from 4.5mm shares by DMD. Selling shareholders intend to sell 3mm shares.

. For content, international expansion, working capital, product development, sales and marketing activities, general and administrative matters and capital expenditures. . Currently anticipates that aggregate investments in content during the year ending December 31, 2011 will range from $50 million to $75 million.

Demand Media (DMD)	DMD, C+, 8					Post IPO shares: 83mm
Web content & registration
Santa Monica, CA		2008	2009	Sept9mos09	Sept9mos10	IPO Mkt
Revenues ($mm)		$170	$198	$143	$179	Cap (mm)
Gross margin % of rev		42%	42%	42%	47%	$1,241
Operating loss $		-$19	-$18	-$15	-$3	@$15
Net income (loss)		-$15	-$22	-$19	-$6
Net income % of rev		-9%	-11%	-13%	-3%
Segment breakdown						% change
Owned and operated websites				$52	$76	47%
Network of customer websites				$24	$30	26%
Total Content & Media				$76	$106	40%
Registrar				$67	$73	9%
Total revenues				$143	$179	25%
Quarterly results	Sep-09	Dec 2009	March 2010	June 2010	Sept, 2010	Dec, 2010*
Revenues ($mm)	$52	$55	$54	$60	$65	$73
Gross margin % of rev	43%	43%	44%	48%	49%
Operating income	-$3.5	-$3.2	-$3.2	-$1.0	$0.9
Net loss	-$4.1	-$4.0	-$4.1	-$1.9	-$0.3	$1.2
Valuation Ratios	IPO Mrkt	Price /	Price /	Price /	Price /	% offered
annualizing Sept 3 mos	Cap (mm)	Sales	Earnings	BookValue	TangibleBV	in IPO
Demand Media (DMD)	$1,241	4.2	258	3.0	13.9	9%
SCORECARD		Mgt	Market	Market Do-	Proprie-	Total
1-5, 5 is high			Growth	mination	tary	rating
20 is perfect		2	3	2	1	8
COMPARE
Valuation Ratios	IPO Mrkt	Price /	Price /	Price /	Price /
annualizing Sept 3 mos	Cap (mm)	Sales	Earnings	BookValue	TangibleBV
Demand Media (DMD)	$1,241	4.2	258	3.0	13.9
Yahoo (YHOO)	$21,260	2.5	13	1.8	2.6
AOL (AOL)	$2,620	1.1	1	1.2	2.0