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Why Demand Media may be going downhill?

|Includes:Leaf Group Ltd. (LFGR)
In an official blog post, Google announced a change to its search algorithm to reduce rankings for low quality sites which are "low-value add for users, copy content from other websites or sites that are just not very useful content". For those who have been following the story, the last definition would probably include Demand Media, though its CEO, Richard Rosenblatt, has been denying themselves a content farm or a site of low quality content.
 
This could have a big impact on Demand Media's traffic and hence its revenue. So just how reliant is Demand Media on search engine traffic? According to Demand Media’s IPO filings, about 41% of its websites’ page views in the third quarter of 2010 came directly from referrals from search engines, mostly Google.
 
It could take a few months to see how this actually affects Demand Media's financials. But for now, I would stay away from the stock.
 
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Stocks: LFGR