Demand Media Reports Q4 and 2012 Results:Revenue up 17%, Registrar Revenue up 12%

Demand Media Reports Fourth Quarter and Fiscal 2012 Results

• Record Fourth Quarter and 2012 Revenue and Revenue ex-TAC
• Q4 and 2012 Adj. EBITDAGrowth Each Exceed 20% to $29.4M and $103.4M
• Q4 and 2012 Adj. EPS Grow 50% and 56%
• Company Announces Plan to Explore its Separation into Two Public Companies

Demand Media, Inc. (NYSE: DMD), a leading digital media and domain services company, today reported financial results for the fourth quarter and fiscal year ended December 31, 2012.

“We finished the year on a high note, posting record fourth quarter results and completing our fifth consecutive year of record revenue and Adjusted EBITDA,” said Richard Rosenblatt, Chairman and CEO of Demand Media. “We improved content quality and diversified our distribution channels by successfully revamping our content platform in 2012, and are now prepared to significantly increase our content investments in 2013. In addition, we became a leader in the generic Top Level Domain opportunity, due to substantial investments we made in 2012. We plan to increase this investment ahead of the expected launch later this year.”

Rosenblatt added: “As a result of these two different growth opportunities, we also announced today that our Board of Directors has authorized a plan to explore the separation of our business into two independent publicly-traded companies via a tax-free spin-off. If approved, the separation will facilitate better operational and strategic flexibility, enabling each business to focus on its distinct priorities and growth opportunities.”

Q4 2012 Financial Summary:

• Content & Media revenue ex-TAC grew 25% year-over-year, driven by 24% page view growth on the Company’s owned & operated properties as well as 37% growth in network RPMs ex-TAC, reflecting higher revenue from network content partners.
• Registrar revenue grew 10% year-over-year, driven by an increase in the number of domains on our platform, due primarily to growth from new partners.
• Adjusted EBITDA increased 24% year-over-year, resulting in 110 basis points of margin expansion to 30.3% of Revenue ex-TAC. This improvement was driven by the growth in higher margin Content & Media revenue and operating leverage.

“In 2012 we generated over $60 million of free cash flow, which more than funded our acquisition of Name.com and the repurchase of nearly $9 million of our common stock,” said Demand Media’s CFO Mel Tang. “We plan to continue reinvesting our strong cash flows into long-term growth opportunities, such as our gTLD initiative as well as growing and diversifying our content offerings.”

Business Highlights:

• Demand Media ranked as a top 20 US web property throughout 2012, and ranked #13 in January 2013.
• Demand Media reached more than 125 million unique visitors worldwide in January 2013.
• eHow.com ranked as the #12 website in the US, with 62.0 million unique users in January 2013.
• LIVESTRONG.COM/eHow Health ranked as the #3 Health property in the US in January 2013.
• Cracked ranked as the #1 Humor property in the US in January 2013.
• On December 31, 2012, Demand Media acquired retail registrar Name.com, expanding its registrar platform as it prepares for the historic release of new gTLDs.
• During the fourth quarter of 2012, Demand Media repurchased approximately 572,000 shares of common stock for $4.9 million under its Board-authorized $50.0 million share repurchase program. To date, the Company has repurchased approximately 4.0 million shares of common stock for $30.8 million.
• On February 19, 2013, the Company announced that its Board of Directors has authorized a plan to explore the separation of its business into two distinct publicly traded companies.

Q4 2012 Operating Metrics:

• Owned & Operated page views increased 24% year-over-year, driven primarily by strong traffic growth on eHow.com and LIVESTRONG.COM. Owned & Operated RPMs were relatively flat year-over-year.
• Network page views decreased 8% year-over-year to 4.5 billion, due primarily to lower traffic from our social media partners. Network RPM ex-TAC increased 37% year-over-year, reflecting higher revenue from our growing network of content partners, primarily YouTube.
• End of period domains increased 8% year-over-year to 13.7 million, driven primarily by the addition of higher volume customers and continued growth from existing resellers, with average revenue per domain flat year-over-year.