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Demand Media (NYSE:DMD)

Q3 2012 Earnings Call

November 05, 2012 5:00 pm ET

Executives

Julie MacMedan - Vice President of Investor Relations

Richard M. Rosenblatt - Co-Founder, Chairman and Chief Executive Officer

Mel Tang - Chief Financial Officer

Analysts

Ross Sandler - Deutsche Bank AG

Sameet Sinha - B. Riley & Co., LLC, Research Division

Sean Sun-Il Kim - RBC Capital Markets, LLC, Research Division

Brian Patrick Fitzgerald - UBS Investment Bank, Research Division

Michael B. Purcell - Stifel, Nicolaus & Co., Inc., Research Division

Patrick D. Walravens - JMP Securities LLC, Research Division

Operator

Good afternoon. My name is Jay and I will be your conference operator today. At this time, I would like to welcome, everyone to Demand Media's Third Quarter 2012 Financial Results Conference Call. Today's speakers will include Julie MacMedan, Richard Rosenblatt and Mel Tang. A question-and-answer session will be made available to all attendees at the end of this call when prompted. [Operator Instructions]

And now, we will turn the call over to Julie MacMedan, Vice President of Investor Relations. Ms. MacMedan, you may begin.

Julie MacMedan

Thank you, Jay, and good afternoon, everyone. On behalf of Demand Media, welcome to our third quarter 2012 conference call. And thanks for everyone joining us today.

You can find our press release along with supplemental materials posted on the Investor Relations section of our corporate website, which is located at ir.demandmedia.com.

On the call with me today are Richard Rosenblatt, our Chairman and Chief Executive Officer; and Mel Tang, our Chief Financial Officer. Following the Safe Harbor statement that I will make, Rich will update you on our business. Mel will then provide details on our third quarter financial performance and key operating metrics, and finish with guidance for the fourth quarter and fiscal year ending December 31, 2012. Following the prepared remarks, we will open up the line for Q&A.

Before we get started, we need to make the following Safe Harbor statement. We would like to remind everyone that during today's conference call, management will make certain forward-looking statements, which are subject to various risks and uncertainties that could cause actual results to differ materially from our current expectations discussed in such forward-looking statements.

In particular, comments about our anticipated future revenue, earnings, operating expenses, page views and growth rates, as well as statements regarding our business strategy and objectives, plans, intentions, operating outlook and planned investments are considered forward-looking statements. Factors that could cause actual results to different materially from anticipated results are detailed in our press release furnished to the SEC.

I would also like to point out that during this call, we will discuss certain non-GAAP financial measures while talking about the company's financial and operating performance, including revenue ex-TAC, adjusted EBITDA, adjusted EPS and certain free cash flow metrics. A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measures can be found in the financial tables included at the end of our press release. In addition, unless otherwise noted, all references to traffic-related metrics in our remarks today are based on comScore data.

Lastly, before we begin, I would like to remind everyone that today's conference call is being recorded and that it's also available via webcast on the Internet through our Investor Relations website. A replay will be available on the site.

With that, I'll now turn the call over to Richard Rosenblatt, our Chairman and CEO. Rich?

Richard M. Rosenblatt

Thank you, Julie, and welcome to our 2012 third quarter results call. We reported record revenue and profitability this quarter, driven by strong traffic growth to our core owned and operated properties. We also made significant progress in areas where we see accelerating growth potential going forward.

During Q3, our properties reached more than 125 million monthly unique visitors and generated more than 1 billion monthly worldwide page views, both all time records. Well, what is driving this success? It's our action-oriented content, our engaging communities and our expansive monetization platform. Let me give you a few examples.

First, our content. Whether it's an article on Planet Celebration, a video showing a busy mom how to plan a family meal or a mobile app helping a jogger map her route, we make an impact on 125 million people's daily lives every single month. Using our vast portfolio of digital products, services and popular websites, we deliver the quality content and rich online experiences consumers demand.

All the things people need to run their daily lives are found in our properties. We call it Content For Real Life. Over the past year, we improved and expanded our content creation and distribution platforms, and significantly remediated our content library. All in all, we really raised our game. We elevated the quality of our creators, segmented them into specific content categories based on their expertise, expanded the diversity of our articles and added assignment editors to make sure we better curate our content.

As quality increased, so did our distribution. A year ago, virtually all of our new articles were published to our own properties. Today, almost half our articles are being published to our network of content partners. Going forward, we expect our content creation and distribution to be even more diversified. Given this product -- given this progress, for the first time in over a year, we ramped our content spend for 2 straight quarters.

Second, our engaged community. We had built a dedicated and engaged community across our properties. Let's talk about LIVESTRONG.COM for instance. In Q3 alone, via our applications, this community tracked over 6 billion calories. That means our members logged more than 129 million minutes of exercise, which equates to 246 years, and they lost a total of 416,000 pounds just this quarter.

Our growing LIVESTRONG community continues to be supportive and engaged despite the recent headlines about Lance Armstrong. To clarify, our relationship is with the LIVESTRONG Foundation, not with Lance, and we are aligned in empowering people to live healthier lives and we support the important work of the foundation. We have built a powerful destination, popular application and a very engaged community. None of this has changed and we have seen no material impact on the consumer traffic, or the metrics.

Third, our expansive monetization platform. We believe that our approach to monetization positions us well to leverage the best aspects of direct and network monetization. Our monetization philosophy embraces diversity by incorporating direct ad sales along automated exchanges. We seek to ensure that our inventory is optimized for the best advertiser and the best user experience. The combination of our intent-driven audience, our premium content production capabilities and our ability to integrate mobile, video and social elements to the display mix, positions us well to take advantage of the advances that are occurring across multiple advertising platforms. These 3 strengths, our content, our community and our monetization platform, are driving our success as we continue to set record highs in traffic and audience on each of our core properties.

First, eHow. For internal data in September, eHow attracted over 100 million unique visitors worldwide for the 11th consecutive month. We also became the #13th largest web domain in the U.S., up from #16 in June. The total worldwide audience of LIVESTRONG is up 97% year-over-year in September. And LIVESTRONG continues to rank as a top health property throughout the U.S., right now #3 in September.

The Cracked network, which includes IndieClick, for the first time became the #1 humor property in the United States in September, with over 9.8 million unique visitors. Further, Cracked is also #1 humor site on mobile with 3.5 million unique visitors. This continued and growing success of our core owned and operated properties has positioned us to move aggressively into additional growth areas. Let's discuss these areas and our progress. Content Channels, mobile, video, and international.

Our Content Channel solution help brands and publishers attract new audiences. During Q3, content partner revenue grew significantly versus Q2, driven primarily by 38% page view growth just quarter-over-quarter across our partner sites according to our internal data. During the quarter, we launched 7 new channels, expanded existing channels and added new partners. We are achieving very attractive, estimate internal rates of return on content for our partners, which is why we are increasing production in this area. We see it as a growing opportunity to distribute our data-driven content more broadly, and we expect Content Channels to be a significant growth driver in 2013 and beyond.

Mobile. One of the most exciting growth opportunities across the company which utilizes our content, community and monetization platform is mobile. Because mobile is such a natural extension of our existing business, we expect to be one of the big winners from a secular shift to mobile.

The vast majority of our content library of content is a natural fit for the mobile device as it's short and actionable. Consumers are using their mobile devices to access our content at different times during the day than they do on their desktop, which means to-date, mobile has been accretive to our audience. We reached 24 million unique visitors via mobile traffic to our owned and operated properties in September, up from 20 million in June.

We continue to improve the mobile experience for these consumers. For example, we've gone through responsive designs across all our properties, whereby the content changes based on the screen size of the device.

But more importantly, we believe that mobile represent a tremendous new opportunity for our content-creation capabilities. We are highly focused on new content formats and new types of content that leverage the unique aspects of the mobile device. Mobile devices are untethered, always on, and capable of everything, from communication to photography to commerce. We see a lot of new content possibilities in the future.

Let's talk about the monetization on mobile. Like desktop monetization, companies with scale and expertise should achieve superior mobile monetization rates. We are using our platforms and team to optimize this growing inventory. Mobile RPMs continued to increase in Q3, growing more than 40% compared to Q2.

As on a desktop, our intent-driven content on mobile should monetize higher than industry averages. We continue to stay on the leading edge of mobile monetization as the marketplaces and technology continue to evolve rapidly.

Video. We've continued to view video as an important long-term growth opportunity and have built a platform as a key competitive advantage in this increasingly important digital medium. We continue to scale and expand our video publishing capabilities with increased video content production on our owned and operated sites and for our Content Channel partners. Through our YouTube original program relationship, we've been able to showcase our expertise in creating broadcast-quality video optimized for online viewing. While we, like many others, are awaiting word from YouTube on renewals, we are leveraging this know-how into other video initiatives. For example, our standard video production was up 30% quarter-over-quarter, which includes video production for Content Channels as well as our international sites. And we expect to continue to invest in video across all distribution channels, including our owned and operated, as well as YouTube.

International. International expense is another long-term growth area that is benefiting and should benefit from our content, community and monetization platforms. By implementing our domestic learnings, we have been able to exponentially grow eHow en Español site with visits nearly doubling quarter-over-quarter according to our internal data.

We reached critical mass in September with more than 5 million visits and our page views continue to increase sequentially, driven by both search and social. The site today has over 1.5 million highly-engaged Facebook fans and Facebook referrals drove nearly half of the total page views in Q3. This is also according to our internal data. Our strategy is to leverage these learnings into additional markets over the coming quarters.

Now turning to Registrar. We have invested in building our Registrar platform into second largest in the world in anticipation of leveraging this valuable asset for the new gTLD expansion. In Q3, our Registrar platform grew 11% driven by the expanding number of domains on our platform. Our team is focused on building the infrastructure to support new business models that will be created by gTLDs.

To reiteratively share in our last call, we believe the introduction of new gTLD ushers in a historic opportunity and a multibillion-dollar industry with more than 230 million domain names currently under registration. We expect to benefit from this opportunity in a number of ways. We anticipate increased domain registrations for our existing Registrar business and we plan to add 2 new revenue streams. We'll become a registry in our own right and provide registry services for other parties. We expect these new opportunities to enhance our revenue growth and expand our margins.

Recently, ICANN provided a more definitive schedule that accelerated the delegation of new gTLDs into Q2 2013. In December, ICANN intends to hold a lottery to assign numbers to determine the order of new gTLD application reviews, contract negotiations and then the ultimate launch. We expect gTLDs to begin being delegated after ICANN's meeting in Beijing in April 2013. We expect priority will be given to the internationalized domain names, known as IDNs, as the first new gTLDs to go live. This means that the first non-IDN gTLDs will likely go live in late June of next year, which is a full quarter earlier than we all previously expected. After that, ICANN expects to delegate 80 to 85 new gTLDs per month with a target of 1,000 per year.

As we've discussed previously, there is an objection process built into ICANN's timeline. We believe that our applications are clearly within ICANN's guidelines and we have a strong competitive position with respect to our applications. We will continue to keep you updated in further calls.

Summing things up, our leadership in content, community and monetization is driving record performance and continued momentum in our core business. We are ramping investment in text and video content production for our core properties and new distribution points. In addition, we are well-positioned to capitalize an important shift to mobile, and we plan on taking a leadership position with new gTLDs.

Now, I'll turn the call over to Mel to review our Q3 financial results and business outlook. Mel?

Mel Tang

Thank you, Rich. We are pleased to report another strong quarter, again delivering on the 3 financial themes we introduced earlier this year. First, accelerating top line growth led by Content & Media; second, significant cash flow generation; and third, investments in new growth opportunities. In light of our strong year-to-date performance and outlook, we are increasing our guidance for 2012, which I will cover towards the end of my prepared remarks.

Now, let's discuss our third quarter results in more detail. Revenue, excluding traffic acquisition costs or TAC, was $92.8 million, up 19% year-over-year. Adjusted EBITDA was $27.6 million, up 28% year-over-year, resulting in 210 basis points of year-over-year margin expansion as a percentage of revenue ex-TAC to 29.8%. Free cash flow was $16.6 million, up from $6 million in the year ago quarter.

Our Content & Media business drew the -- drove the majority of our top line growth. More specifically, year-over-year Content & Media revenue ex-TAC growth accelerated from 18% in Q2 to 24% in Q3 to $58.8 million. Owned and operated revenue grew 18% and network revenue ex-TAC grew 48%. Our owned and operated revenue increase of 18% was driven by 33% year-over-year growth in owned and operated page views to 3.4 billion, led by strong growth in our core owned and operated websites, particularly eHow and LIVESTRONG. This traffic growth was partly offset by an 11% year-over-year decline in owned and operated RPMs to $13.49 due to higher growth from properties with lower RPM page views, such as LIVESTRONG and international properties. And two, incremental traffic growth for mobile where we are experiencing significant RPM growth but which currently have lower RPMs. Sequentially, owned and operated RPMs were essentially flat compared to $13.50 reported in Q2.

Network revenue ex-TAC growth was driven by a 50% increase year-over-year in network RPMs ex-TAC to $2.70, reflecting revenue growth from our growing network of content partners such as YouTube, and a 2% decrease in network page views to 5 billion, due to lower traffic from our front [ph] enterprise partners offset partially by growth from new Content Channel partners and our IndieClick publisher network.

On to our Registrar. Revenue was $34 million, up 11% year-over-year, driven by 12% year-over-year growth in end-of-period domains to $13.7 million, due primarily to growth from large resellers, and a 2% decrease year-over-year in annualized revenue per domain or ARPD to $9.99 due to a mix shift to these larger, higher-volume resellers.

Turning to consolidated operating expenses. Our Q3 GAAP operating expenses were $93.6 million, up 10% year-over-year. Excluding depreciation, amortization, stock-based comp and other non-GAAP adjustments, total operating expenses were $71.3 million, down 210 basis points as a percentage of revenue, driven primarily by mix shift to higher-margin Content & Media revenue as well as operating leverage from product development and G&A expenses, offset partially by higher sales and marketing as we invested in marketing initiatives.

Which takes us to Q3 cash flows. Cash flow from operations was $24.6 million, up 12% year-over-year, even as our revenue shifts from registration revenue that's collected upfront to higher-margin advertising revenues from our Content & Media business. Discretionary free cash flow was $20.1 million, up slightly year-over-year as well as quarter-over-quarter while reflecting higher CapEx associated with infrastructure for our gTLD initiative.

Now, onto free cash flow. In Q3, we generated $16.6 million of free cash flow versus $6 million in the year-ago quarter. While the $10.6 million year-over-year improvement primarily reflects lower content investment as it compared to last year, for the first time in over a year, we increased our investment for 2 consecutive quarters, reflecting an important inflection point for our business.

On that note, I want to spend a few minutes updating you on our content investments. As Rich mentioned, our content creation and distribution platform has come a long way over the past year. First, we extensively remediated and removed content; second, we significantly improved the quality and diversity of new content produced; and third, we successfully diversified our content distribution channel. Importantly, we accomplished the above while achieving high cash on cash returns from our content investments. The combination of these factors lead us to increase our content investment quarter-over-quarter by 40%. Going forward, we intend to continue to increase our investment in content in an aggressive yet disciplined manner.

We believe that our ongoing focus on expanding our distribution and production capabilities will open new content opportunities. And we are particularly excited about mobile and international markets where we are seeing double-digit traffic growth month over month.

Now, a brief update on our balance sheet and liquidity. At September 30, we had $112.9 million of cash and equivalents, no long-term debt and net of our $10 million in letters of credit, $95 million available under our $105 million revolving credit facility.

Now, onto financial guidance. We are introducing guidance for Q4 and updating our previously issued full year 2012 guidance. Our updated 2012 guidance reflects a few key trends. Top line growth, driven by continued accelerating Content & Media growth.

Within Content & Media, Q4 revenue driven by owned and operated traffic growth in our core properties. We expect RPMs up slightly as compared to Q3 levels, reflecting some seasonal strength in improving mobile RPMs.

In our Registrar business, our growth rate over the past few quarters reflects the focused expansion in our reseller base where we have executed the strategy of onboarding high-volume but lower our ARPD resellers ahead of new gTLDs. Going forward, we expect Registrar growth to return to its historic high, single-digit growth rate until new gTLDs are issued as we turn our Registrar resources to focus on preparing for scaling the gTLD growth opportunity.

Our Q4 2012 adjusted EBITDA guidance reflects our commitment to deliver current year results while continuing to invest in the long-term growth initiatives that Rich talked about. Also, we plan to continue to generate strong free cash flow while reinvesting in data-driven strategic investments such as content in new gTLDs. As I mentioned earlier, we intend to significantly increase our content spend above levels achieved in Q3.

Specifically, for Q4, we are guiding to revenue ex-TAC of between $95.5 million and $97.5 million, implying 19% year-over-year growth at the midpoint. Adjusted EBITDA between $27.5 million and $28.5 million, implying a 29% margin on revenue ex-TAC at the midpoint. Adjusted EPS of between $0.10 and $0.11 per share, implying 38% year-over-year growth at the midpoint. For full year 2012, we are increasing our guidance to revenue ex-TAC of between $359.8 million and $361.8 million, implying 16% growth at the midpoint, up from our previous midpoint of 14%. Adjusted EBITDA between $101.6 million and $102.6 million, implying a 28.3 margin on revenue ex-TAC at the midpoint. And adjusted EPS of between $0.37 and $0.38 per share, implying 52% growth at the midpoint, up from our previous midpoint of 44%.

To summarize, Q3 was another strong quarter for Demand Media, and we are excited to return to growing our content investments and to continue to pursue other growth opportunities in front of us.

That concludes my prepared remarks, I would now like to open the line for Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] And our first question comes from the line of Ross Sandler with Deutsche Bank.

Ross Sandler - Deutsche Bank AG

I just had 2 quick questions on the Registrar side of the business. So Mel, it's been decelerating a little bit over the past few quarters, and I think you just said high-single digits for 4Q despite a slightly easier comp. So what do you guys think of the long-term growth rate in that segment? And is high-singles the way to think about it outside of the new gTLD initiatives? And then, the second one is around -- Google recently introduced this exact match domain algorithm change, which sounds kind of confusing. But from what I understand, it's targeted toward keyword-based domains. Do you think this will have any impact on industry volumes going forward? Can you just talk a little bit about what you're seeing from the industry volume side?

Mel Tang

Sure. So on your first question on the long-term growth as it relates to Registrars including TLDs, yes, I think what we did last year was go out and onboard resellers to increase our distribution reach ahead of TLDs. And so, copy against that, that's leading to the deceleration. Going forward, I do think that will you see year-over-year growth or more in the high-single digits on the Registrar? Once gTLDs get delegated and launched, that should have a dramatic impact on our growth rates, but that's yet to be determined based on the outcome of the process. On your second question on the exact match domains, specifically as it relates to the Registrar business, we haven't seen an impact thus far. And then on the media side, it doesn't apply to us. So as far as the exact match domains, not a big impact on us.

Operator

Next to the line of Sameet Sinha with B. Riley.

Sameet Sinha - B. Riley & Co., LLC, Research Division

Yes. A couple of questions regarding guidance. You -- in the fourth quarter guidance, the midpoint implies a slowdown versus what you did in the third quarter. Can you speak about the reasons for that? Also, EBITDA guidance implies a slight decline from third quarter where seasonally, it's a really strong quarter for you. So, can you talk to that?

Mel Tang

I think on our revenue guidance at the midpoint, our percentage growth is consistent with Q3, and I think it really reflects a little conservative -- conservatism about the macroeconomic environment, the impact of Hurricane Sandy, the elections. But I think that it is consistent with Q3. And then, on EBITDA, I think you're referring to margins relative to Q3. That reflects our intention to continue to invest in these long-term growth initiatives that Rich talked about, essentially taking the outperformance in Q3 and investing them for the long haul.

Operator

[Operator Instructions] Our next question comes from Sean Kim with RBC Capital Markets.

Sean Sun-Il Kim - RBC Capital Markets, LLC, Research Division

A couple of questions. First, on network RPMs. I think it benefited significantly from YouTube. Should we expect the same type of RPM trends in the network side going forward? And also, on your cash, I think you ended the quarter with something like $113 million of cash and you guys filed a mixed shelf recently. How should we think about the use of cash, acquisitions versus buybacks? I don't think you bought back any stock in the quarter. Any color there would be helpful.

Mel Tang

So on network RPMs, in Q3, certainly benefited from YouTube. That should continue into Q4. Really depends on kind of how some of the page view dynamics on the network side go. And on the cash balance and where we see use of -- or deploying capital, we look at a combination of acquisitions, increasing content spend. And the shelf really is there to provide maximum flexibility should we need to deploy capital and strategic investments.

Operator

Next, we have the line of Brian Fitzgerald with Jefferies.

Brian Patrick Fitzgerald - UBS Investment Bank, Research Division

I was wondering if you noticed any changing dynamics since Google upped its commitment around YouTube to the tune of $200 million. And then as a follow-on, could you give us a sense of what you see in terms of either CPCs or kind of click-throughs for YouTube videos versus text-based content, say, on eHow?

Richard M. Rosenblatt

Brian, I'm sorry are you talking when they increased up to $200 million a while back?

Brian Patrick Fitzgerald - UBS Investment Bank, Research Division

Yes.

Richard M. Rosenblatt

No, I think -- as you know, they rolled out different channels at different times. I'm sorry, are you talking about the advertising commitment?

Brian Patrick Fitzgerald - UBS Investment Bank, Research Division

Yes, sir, the advertising...

Richard M. Rosenblatt

Advertising commitment. You know what, like I said in last conference call, this is not an issue about the quality of the content, or issue about [inaudible] advertisers. Those 2 components are both, have been very easy for YouTube in fact. The only part that has been challenging is driving enough traffic to deliver. So I think we did see some increase, but that's still the question that they're having across all their channels. But we are seeing, if you look at LIVESTRONG Woman for instance, you're continuing to see subscriber growth quite quickly for that category. But we saw a small impact, but that is just something that, I believe, YouTube is trying to figure it now, is the best way to drive traffic through their channels.

Mel Tang

And on your question about monetization on YouTube videos, I think we've seen fairly consistent trends. I don't think anything worth noting in terms of fluctuations. I don't know if that was the question you were asking, Brian.

Operator

Next, we have the line of Michael Purcell with Stifel, Nicolaus.

Michael B. Purcell - Stifel, Nicolaus & Co., Inc., Research Division

A couple questions. One, could you give us the percentage what Google was contributing in the quarter in eHow? I think eHow is about 1/3 of revenues last quarter. And then I had a follow-up on the network page views. It looks like it was down just slightly year-over-year on network comping over the acquisition. But could you just give us a sense of if -- I'm assuming that the YouTube page views are on the network. If those are going up, is there something else declining in the network page views?

Mel Tang

Yes. So let me cover your 2 questions. First is, in this quarter, Google was 52% of -- contributed 52% of eHow pages views. That's pretty much consistent with last year at 51% and last quarter of 51%. So fairly the same there. On network page views, what you're seeing there is 2 offsets: One, which is your Pluck enterprise page views coming down as a result of some customer implementations as well as some seasonality. And then on -- offsetting that is growth in our Content Channel partnerships that -- as well as our IndieClick year-over-year.

Michael B. Purcell - Stifel, Nicolaus & Co., Inc., Research Division

Okay so I understand the Pluck. And then, I'm sorry, just in Google as a percent of total revenues?

Mel Tang

Google as a percent of total revenue is 37%.

Operator

[Operator Instructions] Next, we have the line of Sameet Sinha with B. Riley.

Sameet Sinha - B. Riley & Co., LLC, Research Division

gTLD expense, I think, even a little lower than what you were guiding to, do we assume that's going to be more fourth quarter loaded? And also, can you talk about the mix of advertisers between direct and AdSense in exchange? And my final question will be how should we think about free cash flow moving forward considering that you're increasing your content expense? Any color around there would be appreciated.

Mel Tang

I didn't quite get your second one. But let me talk about the gTLD expense of $3 million. That reflects really just some of the timing that's occurred over the year and getting pushed out. I think you're going to see some expenditures in Q4. It might bleed into Q1 of next year. Just really, it hinges upon the timing of when the process will hit milestones. On the third one, in terms of free cash flow going forward, we haven't come out with 2013 guidance, but clearly, I think as we continue to grow our top line EBITDA performance, we'll be looking to reinvest smartly and we'll be transparent about where that cash flow is going to go.

Sameet Sinha - B. Riley & Co., LLC, Research Division

My third question had been about what percentage of revenues were of advertising revenues direct advertisers versus the exchange?

Mel Tang

I think...

Richard M. Rosenblatt

Branded advertising.

Mel Tang

So branded advertising is fairly consistent, about 10% of total revenues.

Operator

We have the line of Patrick Walravens with JMP Securities.

Patrick D. Walravens - JMP Securities LLC, Research Division

How should we think about 2013? [ph] Can you give us any -- I know you don't want to guide yet, but can you give us any hints in terms of how to think about it?

Richard M. Rosenblatt

I've had - let me jump in. You're talking about 2013. I think the best way to think about is kind of the 2 themes that I was focused on, was you're seeing significant growth in our core business. From our content corpus continue to grow as well as the new content format and just the whole process around our studio. And then, we're taking that platform and all those learnings, and the creators, and the algorithms and everything we did to put that into mobile, international, video and a number of other areas. So I think you're going to hear us, in 2013, talk much more about how our core business continues to grow, but how we're able to leverage our content, our active community and our platform across these new areas in what we think is a really competitive way, right. I mean if you think about the assets that I've talked about for a long time, but are now 125 million people visiting our sites every single month, the amount of expert creators we have that can create large volumes of intent-driven content and a community that is active, looking for whether it's apps, or mobile, or mobile and apps, mobile web, we're going to take those off our network to Content Channels to the mobile device to different countries as well as to video and whatever new platform comes about.

Patrick D. Walravens - JMP Securities LLC, Research Division

So I mean, would you be disappointed, Rich, if you didn't accelerate revenue next year -- revenue growth next year versus this year?

Richard M. Rosenblatt

That's a hard question to answer. But as you've seen, we've accelerated revenue growth every quarter since the beginning of this year. So obviously, that's our continued goal. I mean, we want a business that continues to grow.

Operator

Next, we have the line of Ross Sandler with Deutsche Bank.

Ross Sandler - Deutsche Bank AG

I just had one other follow-up on the O&O page view growth. So I think you guys had rattled off some growth rates for either uniques or page views for LIVESTRONG and Cracked which were 90-plus percent, if I heard correctly. And then you just said that the eHow page view generation from Google was, I guess, pretty consistent year-on-year. So how do we reconcile -- so you got 33% overall O&O page view growth, what are like the kind of trending lines within that between eHow, LIVESTRONG, Cracked and then anything else that flows through that line?

Richard M. Rosenblatt

I think, Ross, I think one of the things is eHow continues to grow significantly also, but the mix is changing. So while Google still generates about the same amount of page views, you're continuing to see a diversification of page views across different mediums, which is exactly what we were trying to do. So I did -- by saying that LIVESTRONG grew 97% year-over-year, eHow continued to grow. And I think I've mentioned on comScore, it continues to grow. So I don't know if that was what that question was related to...

Ross Sandler - Deutsche Bank AG

Yes. I mean, I guess it would just imply that eHow internal page view growth is something that's kind of below that average of 33%. And then Cracked and LIVESTRONG are growing much faster, but off of a smaller base. Is that kind of the right way to think about it? Like 15% to 20% for eHow, and then the balance is...

Richard M. Rosenblatt

No, no. Sorry about that. But actually, eHow grew significantly higher than that. Cracked -- LIVESTRONG grew 97%, Cracked grew less only because you are seeing a big adoption in the mobile device when it comes to Cracked. But on the page views for eHow -- Mel, do we break that out?

Mel Tang

We don't break it out, but it was significantly higher than the average. So I think, if you think about the -- how you get back to that 33%, Cracked is lower than that average due to, one, to the fact that Rich mentioned. But also, we're continuing to test a few ways to improve the yield on that site. And so, that had some slowing aspect to the page view growth. But eHow and LIVESTRONG were the big drivers of growth this quarter, and you had Cracked a little bit lower than the average.

Ross Sandler - Deutsche Bank AG

Okay. Yes. That's super helpful, Mel. And then just one other clarification. I think you said that branded ad sales was around 10% of overall revenues. So that's overall revenue ex-TAC or around 20% of owned and operated revenues. Is that about right?

Mel Tang

The 10% is on total revenues. But it still gets you roughly in the same ballpark.

Operator

And that question will come from Sean Kim with RBC Capital Markets.

Sean Sun-Il Kim - RBC Capital Markets, LLC, Research Division

Just a follow-up on gTLD expenses. For the TLDs, where there are multiple applicants in an auction situation in the future, do you guys sort of expect to spend a certain amount of money in an auction situation? Can you -- is there an expectation for that?

Mel Tang

Yes. I think it really depends on which TLD. As we mentioned in the past, we've done pretty in-depth bottoms up analysis of what we're willing to value each TLD at. And I think we are prepared to go after the ones that we think are valuable and having that value guides those in our mind, allows us to deploy our capital to the right places and in the right amounts.

Richard M. Rosenblatt

[indiscernible] To think the way we think about the TLDs is the way we think about a piece of content is, we look very closely what the long-term return is going to be, and we'll spend the amount of dollars that hit that return. But we won't spend more. So that way, we can go across many, many TLDs and have kind of financial discipline to pay the right price. And why we think, in some cases, we may be able to pay more, is because of our distribution as well as our level of data, which we think is a real competitive advantage.

Julie MacMedan

Great. Well, that concludes our Q&A session. And we really thank you for joining us. We look forward to reporting our Q4 results and speaking to you then.

Richard M. Rosenblatt

Thank you very much.

Operator

This concludes today's conference. You may now disconnect.

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