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Demand Media revenue and profit beat estimates

Richard Rosenblatt, CEO of Demand Media, attends the Allen & Co Media Conference in Sun Valley, Idaho July 10, 2012. REUTERS/Jim Urquhart
Richard Rosenblatt, CEO of Demand Media, attends the Allen & Co Media Conference in Sun Valley, Idaho July 10, 2012. REUTERS/Jim Urquhart

By Jennifer Saba

(Reuters) - Demand Media reported on Tuesday better-than-expected first quarter revenue and profit on growth at its media websites like eHow, Livestrong and Cracked.

Demand Media makes its money in two ways. In its media business, freelance writers, photographers and videographers provide articles and videos designed to appear at the top of Internet search that in turn generate advertising. The other is a registrar business that maintains top level generic web domain names like ".actor" and ".social."

In February, Demand Media announced it was separating those businesses and spinning out the registrar division.

"We are making steady progress, clearly there is a lot of work ahead of us," Demand Media Chief Financial Officer Mel Tang said in an interview on Tuesday in reference to the spin-off scheduled to be completed by next February.

Demand is branching out into other areas to diversify its business model including paid content. For example it acquired for less than $10 million the subscription-based Creativebug, a website dedicated to help people interested in arts and crafts.

First quarter revenue rose 17 percent to $100.6 million, beating analysts' average expectation for $95.3 million, according to Thomson Reuters I/B/E/S. Stripping out traffic acquisition costs, revenue rose 15 percent to $95.2 million.

The company slightly narrowed its full year total revenue forecast to a range of $436 million to $442 million from a range of $435 million to $443 million.

The company said first quarter net income rose to $700,000 or 1 cent per share, compared with a loss of $1.8 million or 2 cents per share in the same period a year ago.

Adjusted for items including stock-based compensation, earnings per share were 9 cents versus 7 cents in the same period a year ago. Analysts were expecting 8 cents.

(Reporting by Jennifer Saba in New York; Editing by Chris Reese and Tim Dobbyn)

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