Demand Media raises $100M more for domain name land grab

Demand Media, the 18 month old company founded by former MySpace chairman Richard Rosenblatt, has gulped another $100 million chunk of venture funding for its domain name purchases.

The latest funding, led by Goldman Sachs, is the company’s third. The previous two, for $120 million and $100 million respectively, bring the total to a whopping $320 million.

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Companies like Demand buy up lists of Web site names that users are likely to accidentally type into their browsers. People looking for the popular photo site Flickr, for example, may instead type in Flicker.com.

These faux sites are then plastered with ads and information vaguely relevant to whatever the hapless surfer might have been searching for. Once the surfer lands on a site, Demand Media serves an ad from Google or some other ad network, allowing it to collect money. That  strategy made millionaires out of domain-grab pioneers like Frank Schilling and Yun Ye.

Prices for domain names have inflated vastly over the years, which is one reason why Demand needs so much money. The name Business.com sold earlier this year for $360 million, making Demand Media’s assets look like peanuts.

Although Demand could be buying more domains in hopes of eventually selling itself for a premium or passively collecting revenue, it’s more likely the company is developing its web properties into more full-fleshed destinations. Last year, Demand acquired HillClimb Media, which produces web sites.

Competitor Marchex, which owns more than 100,000 domain names, has also revealed more of its business plans. It wants to develop each page into a local, vertical portal with real information related to the domain name, many of them involving city names (for instance, a site might feature “New York” and “plumbers”).

Besides Goldman Sachs, investors in the latest round include 3i Group, Generation Partners, Oak Investment Partners and Spectrum Equity Investors. Sources that talked with PEHub, which broke the story, said that the recent funding would probably be the company’s last.

For our previous coverage on Demand fundings, look here.