Demand Media is beginning to move toward its initial public offering - which could well be the biggest web IPO this year. The company filed a S-1 disclosure with the Securities and Exchange Commission - the first step in this process.

Criticized by some as a content mill, Demand Media's business strategy produces online content for the purpose of attracting keyword advertising. The company's algorithms look at what search words are most popular, and then pays writers to produce content for such sites as eHow.com that match the description, writes Gigaom. It also has branded content sites that it produces and/or manages, such as the Cracked.com humor site and Lance Armstrong’s Livestrong health site.

Not Yet Profitable

In the SEC filing the company, valued at $1.5 billion, says it could raise $125 million. For all the attention the company has received with its business model, it has yet to prove profitable, according to the filing. Demand has generated revenue of $114 million this year and lost $22 million. Furthermore, almost all of the money is coming from traffic, and advertising generated from Yahoo and Google - Google in particular, as it accounts for 26% of Demand's revenue.

These agreements, All Things D notes, appear to be poised to sunset over the next two years: its Google cost-per-click agreement for developed websites, such as eHow, expires in the second quarter of 2012 and its Google cost-per-click agreement for its undeveloped websites expires in the first quarter of 2011. Demand also engages Google's DoubleClick ad-serving platform to deliver advertisements to its developed websites and has another revenue-sharing agreement regarding revenue generated by its content posted on Youtube.com, both of which are currently on year to year terms that expire in the fourth quarter of 2010.

Indeed, one of the "risk factors" of the filing includes the possibility that the company's relationship with Google "from which a significant portion of our revenue is generated" could be terminated or renegotiated on less favorable terms.

Whither Google

How likely is that to happen? If rhetoric that search engine optimization algorithms and techniques are becoming more discerning about content is to be believed - there is a good chance. Problem is, such talk has been circulating to years with little impact. Still, most recent signs do appear to suggest Google and the industry are pushing in this direction.

Consider the following:

• The May Day algorithm change earlier this year has had a significant impact on sites that rely on "long-tail" traffic to bring the majority of visitors to their website, according to Evan Bailyn, SEO expert and founder of First Page Sage.  "Google is now giving less ranking power to sites that have only links pointing to their home pages, and more ranking power to sites that have a smattering of links to inside pages, such as blog articles. This, of course, is an effort to reward sites that are receiving links naturally rather than paying for them."

• The Internet Content Syndication Council is growing increasingly worried about diminishing standards and is considering establishing standards or possibly an accreditation process to keep quality at a certain level. The concern is that these content mills are producing low quality articles that are link based, specifically designed to score high on search, explained Tim Duncan, the ICSC's new executive director. (via Marketing Week). Some members within the organization are pushing Google to tweak its algorithm to give more weight to content quality in its search results.

• Everyone is an editor thanks to social media - and low-quality content is unlikely to be shared, writes Nick Usborne in a recent post on his blog. "Social media may seem to be chaotic, and often generates some fairly frivolous content of its own. But here's one thing you need to understand: Every person using social media is an editor. They will read your content and then decide whether or not it is worth sharing."

• Low quality content also damages your brand, he says. "Why create hundreds of pages of long tail content, attract thousands of visitors to your site, and then leave them feeling disappointed? That’s just a fast way to shoot yourself in the foot."