Newly-public Demand Media, which Seeking Alpha calls "a terrible company" with a fair market price of about $0, had its IPO six months ago at a $1.4 billion valuation and carried a half-way decent share price that hit a high of around $24 but has been rockily falling toward the $13 range, where it was last month. But this week DMD's insider lockout--the period of time during which company executives are prohibited from selling stock--just expired. And as of yesterday afternoon, the stock is tanking.

The easy conclusion is that insiders are dumping their stock because they know their company is a content farm that has little future as Google cracks down on sites that cater aggressively to search engine traffic with content that's little more than search terms surrounded by related words. But it's not because insiders are selling, the financial blogs say--Demand has had a collapse in demand. Just like traffic from Google, demand for Demand Media has simply been... shut off.

The stock typically only trades around 363,000 shares a day, according to The Domains, but since the lockout expired trading volume has fallen drastically. That means fewer people are buying and selling, not that the market was flooded with insider shares.

About 16 people at the company own about 58 million shares, The Domains says. If insiders started unloading, they'd quickly drive the stock to rock-bottom. Surely they must be smarter than that. It seems more likely that the announcement of the insider lockout expiring and the threat of a sell-off is causing potential buyers to stand by for the time being.

At any rate, it looks like the company's got more problems than cracking down on the forums at Demand Studio Sucks.

These are not the blogger you're looking for

It's not a million dollar round on the first day of class, but Contently.com, which just joined the second class of TechStars NY, has raised a $335,000 debt round from Founder Collective.

The start-up has positioned itself as the anti-content farm, helping freelance journalists to manage their careers and big brands to produce editorial content that stands out, all while avoiding the SEO optimized schlock pumped out by Demand Media and others.

Speaking from personal experience, there isn't much money in making freelance journalists your clients. But connecting professional writers with big brands looking for some high class advertorial could be a strong play. A corporation can afford to pay premium freelance rates, since they are chasing pageviews and online engagement, not a return on their dollars via advertising.

“Contently is something that literally every one of our portfolio companies could use," Founder Collective Managing Partner Eric Paley told TechCrunch. “Contently makes content marketing turnkey for it’s growing base of clients."

The danger here is that what makes for really effective content marketing, take the wildly popular OkCupid Trends blog, is an authentic voice and a deep engagement with the subject. Yes, Contently is finding experienced writers to help create great posts. But a freelancer is never going to have the voice and insight of a person who actually works at the company, the path taken by blogging stars like Robert Scoble and Marco Arment.

The connection between these two events was harped on quite a bit in the media, but an analysis of the change in search rankings after the algorithm update, known as Panda, found that eHow, which houses the majority of Demand Media's editorial content, was not negatively affected by the change.

It was especially interesting since some of their peers in the "content farming" industry, like Associated Content and Mahalo, saw traffic on their keywords drop ad much as 93 percent. According to a report from Sistrix, Demand Media even saw its Google rankings increase a bit.

This past week Google announced that it was rolling out Panda to English language speaking nations around the globe, and making some small tweaks to filters here in the U.S.. But the results on Demand Media were dramatic, with traffic from Google falling more than 50 percent, according to Sistrix.

Interestingly, this second update has incorporated signals from average users. Google made it possible for people to block certain sites they don't want to see in their results. In a blog post Google’s Amit Singhal noted, "In addition, this change also goes deeper into the “long tail” of low-quality websites to return higher-quality results where the algorithm might not have been able to make an assessment before. The impact of these new signals is smaller in scope than the original change: about 2% of U.S. queries are affected by a reasonable amount, compared with almost 12% of U.S. queries for the original change."

Demand Media, feeling the heat, issued a statement and blog post affirming that, "Certain third parties that have published reports attempting to estimate the effect of recent search engine algorithm changes made by Google on traffic to the Company's owned and operated websites have significantly overstated the negative impact of those changes on traffic to eHow.com, as compared to the Company's directly measured internal data." They didn't, however, issue any of their internal data to back up this counter claim.

[CEO Richard] Rosenblatt said the niche articles eHow writes about - How to Log In as Guest on Rosetta Stone, for example - may not be everyone's cup of tea, but people want and need this information.

Demand Media's first earnings call yesterday was good, all in all. The company, ticker symbol DMD, made a profit of $1 million in the fourth quarter (although the books show a loss because of stock conversion due to the recent IPO). But that's a huge jump over the $3.9 million loss in that quarter of 2009.

The market seems bullish on the content company, which pays bottom dollar to its writers for putting words on the internet, in spite of the fact that Google said recently that it's working to excise so-called "content farms" (which infamous content farmer Jason Calacanis recently admitted was "polluting the internet," pledging reform) from search results.

About 41 percent of Demand's traffic comes from Google, but Mr. Rosenblatt said his company plays carefully by the big G's rules. He said Demand uses "white hat" tactics in contrast to "black hat" search engine manipulators who pay for links and build armies of fake sites that link to one another.

One Demand Media writer and Seeking Alpha blogger, Rocco Pendola, wrote he's "not ready to buy yet" after listening in on the call. "As somebody who freelances and does contract work for the company, I have often found myself conflicted about what Demand does, where it's headed, and its broader impact," he wrote. But, he said, at least eHow articles today are way better than they were two years ago.

We poked around eHow this morning, and that comparison is hard to judge. Quality seems to vary widely across the site, from "How to Throw a Superbowl Party" to "How to Throw a Great Superbowl Party" to "How to Handle a Teen With Suicidal Thoughts," all posted recently.

But just for fun, excerpts from eHow's front page two years ago:

While the idea of an economic recession brings worry to those who have never experienced a recession, it does not have to. It is important to prepare for an economic recession as best as possible to make surviving one easier. —"How to Prepare for an Economic Recession"

Talk about your activities in your personal essay if you can. Discuss why they’re important to you and how they help to make you who you are. —"How to Spice Up a College Application"

Finally attach the tiny clips to the stainless sheet steel handles of the Head, and the outer most handle. And then add another tiny clip to each tiny clip. —"How to Make a Binder Clip Reindeer"

"Thank you for all the great feedback from the call; probably the first time avocados, paper laterns and roof rakes made their debut!" Mr. Rosenblatt tweeted yesterday. We weren't sure what a roof rake was, but eHow has an extensive collection of articles on the subject.

ajeffries [at] observer.com | @adrjeffries

But investors eagerly snapped up shares of "content farm" king Demand Media Wednesday. Then on Thursday LinkedIn, the smaller, more professional social network, made its IPO intentions official.

One troubling sign, however, from these early offerings, is the lies the securities filings have revealed. The CEOs at both Demand Media and LinkedIn had proudly proclaimed to tech journalists the profits their companies had achieved. But the S-1 filings they had to make in order to IPO tell a very different tale.

In August of 2009, LinkedIn CEO Jeff Weiner told Business Insider that the company was "still profitable" and that ad sales were up 50% year over year. But in its IPO filings yesterday, LinkedIn revealed it actually lost $3.4 million in 2009.

Pre-IPO, Demand Media CEO Richard Rosenblatt was on record multiple times saying his company had always been profitable. The IPO filings revealed that in fact Demand Media's losses were mounting, climbing from $14 million in 2008 to $22 million in 2009.

"I think that they (LinkedIn certainly) would argue that they ARE and have been profitable but for the heavy investment in infrastructure that they are making to build the even more incredible company that they hope they will be one day," says Lawrence Lenihan, CEO of local VC First Mark Capital. "Unfortunately, that is not how the public markets work. This is the critical problem of American business –how can you invest for future gains without the present pains of the market valuing you less. This myopia will be our downfall unless we can create another structure that embraces that investment with trust and accountability of management for delivering those returns in the future."

It's a powerful reminder to journalists that a CEO's claim of profitability isn't worth much without the data to back it up. And for all the talk of how this tech bubble is different from the dot-com version, the first two offerings of 2011 show hot web properties with shaky financials are not a thing of the past.

bpopper [at] observer.com | @benpopper