The Mixologist

Richard Rosenblatt, who sold MySpace to Rupert, is a mogul on the make. He’s raised $320 million to build Demand Media into the next Web conglomerate.

September 26, 2007 –  Attach a cable to Richard Rosenblatt and you could power a small town. The 38-year-old entrepreneur juggles multiple phone calls constantly and can keep six instant message chats going at once. He started his first company in college, launched five more since, co-owns four nightclubs and started with Lance Armstrong a new juice-drink company. “I don’t know how to slow down, and if I did, I’d probably die,” says Rosenblatt.

Most of his attention these days is on spending the $320 million he has raised to build his new company, Demand Media, into the next online media conglomerate. The company’s 300 employees are in an office building four blocks from the Santa Monica pier. There’s good karma. It’s the same building where Rosenblatt was chairman of MySpace, which he sold along with its parent company, Intermix, to News Corp. in 2005 for $650 million.

Demand Media is becoming the Web’s largest social network of hobbyist sites, where professionals and amateurs can write how-to articles or post explanatory videos. Soon they will share advertising revenue. If a popular topic is missing. Demand will pay someone to create a video or article about it. “There is nothing else like this,” he boasts. “It’s as big an idea as MySpace ever was.”

Rosenblatt has acquired 50 narrowly targeted sites such as GolfLink.com, Airliners.net and Trail.com as well as general-interest how-to sites Ehow.com and ExpertVillage.com. The network draws 40 million unique visitors per month, according to Google Analytics. (ComScore Media Metrix, which is known for its conservative definition of traffic, puts his monthly visitors at 13.2 million.)

Demand also owns Enom, the world’s second largest domain registrar after GoDaddy.com, with an inventory of 9.5 million Web addresses. Demand’s domain portfolio brings in another 25 million visitors a month, says Rosenblatt. Enom provided Demand with thousands of “parked domains,” generic destinations such as translation.com, gardening.com and maps.com. Most of them have nothing but ads and come up only when people enter the sites names in a browser’s address bar. Rosenblatt plans to ship them relevant articles and videos from his hobby sites to give visitors a reason to stick around and view more ads.

The money that Demand has raised from such firms as Oak Investment Partners and Goldman Sachs puts it in the Internet big leagues. Rosenblatt’s last financing round--$100 million in mid-September—valued the company at $1 billion, twice its value in the round prior. He expects to gross more than $100 million this year, half of it from ads and half from subscriptions and domain rentals. Earnings before interest, taxes and depreciation could reach $30 million.

Demand’s big ambitions are matched by successful rivals everywhere it turns. Outfits such as Marchex roll up, the add content to, parked domains. Glam Media has successfully aggregated fashion blogs. Ning, created ny Netscape cofounder Marc Andreessen, provides tools for people to build social networks around interests and lifestyles (e.g., Navy wives). MySpace combines video with social networking. About.com also provides user-generated how-tos.

Rosenblatt has acquired most of his sites on the cheap, but you get what you pay for. Until Demand overhauls them, most of the sites are nothing to look at and bring in fewer than a million unique visitors a month. Ehow, the biggest, brings in 3.5 million visitors a month, according to ComScore Media Metrix. That’s not even a tenth of what the New York Times Co. gets out of About.com. Ethan Hall, who runs operations at Web retailer Hustle Paintball, spends nearly twice as much on ad buys at pbnation.com, the number one paintball fan site, as he does on Demand’s pbreview.com

But Rosenblatt has the energy to take on all comers. “People think I’m all show, no go,” he says. “Throughout my career no one ever believed that what I was working on was going to be big. I have to re-prove myself every time.”

Rosenblatt grew up in California’s San Fernando Valley, the son of a nuclear physicist dad and a professor mom. As an undergraduate at ucla he started a firm that placed ads in small newspapers. He kept that going, got married at 23 and indulged his parents by getting a law degree in 1994 at the University of Southern California. But legal work bored him, and he quit after six months.

His father showed Rosenblatt that Internet one day in 1994, and the son instantly saw what a great billboard it would be. He founded CyberShop, which helped companies build web sites. The business struggled, and he merged it in 1995 with a lecture business. The new entity, lmall, helped retailers reach customers through the Web. It was sold to ExciteAtHome in 1999 for bubble-icious $5660 million. (Rosenblatt owned 10%, but lost much of it in the bust.)

A few months later Rosenblatt invented in a Web domain-name reseller called Great Domains. It was sold a year later to VeriSign for $100 million. In September 2000, Rosenblatt took the job of interim chief of Drkoop.com, a health information Web site that was losing $6 million a month. Bad career move. Despite deep cuts, the business couldn’t survive the tech recession. Drkoop filed for bankruptcy and shut down in December 2001. “I was very uncomfortable doing anything big after that,” he says.

In 2002 he opened a nightclub in San Diego (the first of four, all of them named Air Conditioned) and helped launch a fantasy Web site called Superdudes, a social network in which people create cartoon avatars. It got 1 million members in six months. In November 2003 he got a call from a founder of a group of sites called euniverse to take over as chief. The company was losing $4 million a quarter and had delisted from Nasdaq. Still, Rosenblatt wanted in. “I figured, if I fail again, I’m done. But if I succeed, I can do whatever I want for the rest of my career.”

Then-chairman David Carlick, managing director of VantagePoint Venture Partners, was sold on Rosenblatt. “They thought he was a surface guy. They didn’t think he was deep enough to be the ceo,” says Carlick. But he aced the Myers-Briggs personality test they made him take, and he became cheilf in February 2004. He renamed the company Intermix, mixed half a dozen failing businesses and gave MySpace chief Chris DeWolfe free rein and more resources. MySpace grew from 1,000,000 members to 24 million by October 2005, when Rosenblatt sold Intermix to Fox for $650 million—an eightfold increase from the company’s value on the day he arrived. Rosenblatt walked off with $23 million.

After the sale Rosenblatt received a call from Shawn Colo, a buyout investor he had met earlier that year. Colo pitched him his idea of a roll-up of Web sites and parked domains. Rosenblatt thought it would be even more explosive if they added social networking, and they started looking for things to buy,

They recruited a handful of executives from Yahoo, InterActiveCorp and Intermix and lined up two key acquisitions: Enom and Ehow. They pitched their creation to a group of potential investors, including Fredric Harman at Oak Investment Partners, in May 2006.

When Harman had met Rosenblatt a few month prior, “he came across as a slick, fast-talking entreneur,” says Harman. “But by the end of the meeting I concluded that whatever he wanted to do next, I wanted to back him.” Oak has put in a total of $126 million in Demand for a third of its shares.

Rosenblatt used some of the money to buy back 20 sites from Fox, including casual gaming networks Myleauge.com, Casesladder.com and Grab.com, for an undisclosed sum. “They thought it was junk,” he says, a bad fit with MySpace’s young audience. But by adding social-networking tools like chat and personal profiles, Demand has tripled the amount of time users spend on Grab.com, visited mostly by women ages 25-55.

Demand’s size allows it to get better terms on ads served up from the likes of Google, Yahoo and Vibrant. After Demand bought ExpertVillage.com, it tripled the rate it gets on in-text ads. Demand hired its own ad sellers a month ago who have sold space to the Texas state lottery, Lions Gate Films and Paramount Vantage.

The idea is to share the wealth to get more people posting content. Demand pays filmmaker Kyle Saylors $300 to produce 15 two-minute clips on how to win beauty pageants, perform motorcycle stunts and do magic tricks. They run on ExpertVilliage.com. Saylors has made more than $20,000 from the site.

In mid-September Rosenblatt introduced Demand Studios to recruit professional writers and filmmakers like Saylor, and will offer them a percentage of Demand’s ad revenue. Demand’s engineers cooked up an algorithm that predicts which subjects will make the most money based on the popularity of phrases in search requests and topics to which advertisers say they want to be linked.

Maybe a tequilla company will want to be adjacent to one of Rosenblatt's favorite articles on Ehow: his own recipe for the perfect margarita. Stop by one of his bars and if you can get him to stand still long enough, he'll make one for you.