Update: Demand Media New CEO

| About: Leaf Group (LFGR)


The company acquired Saatchi Art for $17 million and picked the startup’s CEO to replace its interim CEO.

We still remain bearish on the company for the long term and the new CEO doesn’t change our thesis.

We knew a new CEO was coming but didn’t expect it to be done via an acqui-hire.

Since updating readers on Demand Media (DMD) and its 2Q earnings yesterday, shares continued to tumble. The stock is now down 10% since the start of the week and down 20% for the last week. The company completed its spinoff of Rightside (web services/hosting unit) earlier this month. We covered the company back in October and noted that the separation was a last ditch effort by management.

The latest news is that Demand bought Saatchi Art for $17 million and named its CEO, Sean Moriarty, as its own. Moriarty is replacing the company's co-founder Shawn Colo. Its other co-founder resigned last year.

Demand has struggled with generating website traffic for a number of years, in part, due to Google's ranking system. The Saatchi acquisition will only add up to $1 million in revenues to Demand's some $330 million on a trailing twelve-month basis. Saatchi Art is a website that allows artists to sell their work. However, it is worth noting that Moriarty was the CEO of Ticketmaster for a couple of years, helping drive a merger of that company and Live Nation Entertainment. It'll be interesting to see what he can do with the floundering Demand Media, but we remain very cautious.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.