Demand Media, an internet-based content creator, filed an IPO registration last week on Friday. An IPO stands for an initial public offering. In other words, the company would like it offer its first stock offerings. They’re hoping to raise approximately $125 million in capital from the sale of stock.

Known best for its eNom.com domain registry, eHow.com website with how-to articles, and YouTube how-to videos, Demand Media has an interesting business model. Instead of focusing on targeting consumers performing generic online searches, the company focuses on specifics. Or as it says in the IPO registration, “Our approach is driven by consumers’ desire to search for and discover increasingly specific information across the Internet.”

While having an interesting model, the company lost $22 million last year, and $6 million in the first 6 months of this year. For a low-cost business, these losses are hard to believe. The company has about 10,000 freelancers working writing and creating videos for them. They only pay writers about $15/article and the makers of videos about $30. Producing approximately 5,700 new items each day, the company sets a standard for freelancer productivity.

eHow.com and other how-to websites owned by Demand Media are reported to have approximately 86 million unique visitors each month, producing 550 million pageviews each month. Looking at those numbers, I can’t believe how a company like this is unprofitable. After reading an article on Tech Crunch, I learned a lot about where Demand Media was making money and where it wasn’t. Here are some quick facts about Demand Media’s profits:

- 44% of the company’s revenues are from its domain business, eNom.com.

- 45% of  the company’s revenues are from advertisers.

- 26% of the company’s revenues are from Google’s ad program, Google AdSense.

- 21% of the company’s revenues are from the eHow.com website.

After seeing this, I determined that the company is spending way to much money on its content creation for eHow.com. Let me break this down for you. Out of the 5,700 new articles and videos everyday, let’s say that 5,200 are articles and 500 are videos. That means Demand Media is spending about $78,000 on articles and $15,000 on videos each day. That accounts for approximately $33,480,000 in the company’s yearly expenses. Seeing that $33,480,000 in spending is only making up for 21% of the company’s revenue, I think the company should use some of its resources elsewhere.

With all of that being said, it’s still yet to come out where and how Demand Media has lost and is still losing money into this year. Would you invest in Demand Media if it goes public? What do you think of their business model? Submit your comments below.