The Flaw in Demand Media's Fast-Food Content Model

After Mike Arrington and Paul Kedrosky's posts on fast-food content this week, I went back and reread the excellent October Wired article on Demand Media.

Demand produces tons of content (4,000 video clips and articles a day) related to specific keywords its software decides are lucrative.

The quality is lousy, but the company meets vast swaths of content demand that aren't currently being filled.

As Wired explains:

What Demand has realized is that the Internet gets only half of the simplest economic formula right: It has the supply part down but ignores demand. Give a million monkeys a million WordPress accounts and you still might never get a seven-point tutorial on how to keep wasps away from a swimming pool. Yet that’s what people want to know.

Demand makes money by cheaply producing articles that rank for "how to keep wasps away"-type searches, then selling ads next to those articles.

There's one problem with this business over time: It's an arbitrage, it's not creating lasting value.

Over time, businesses like exterminators will figure out that they don't need to purchase traffic from Demand. Instead, they can create their own awesome content about keeping wasps away from swimming pools, and replace Demand in Google's organic results.

As soon as exterminators start creating this kind of content, they'll realize they get a lot more value out of the content than just the value of the advertising they had been paying Demand for. They'll find significant additional value in PR, lead generation, social media growth, in internal company communication, and lots more I spelled out here.

The best part? When businesses create content, they have an incentive to do it well. Exterminators want a strong brand, so they'll write strong articles about keeping wasps away from pools.

Ultimately, these incentives will keep us from getting stuck the world of fast-food content that Mike and Paul fear.