Goldman Sachs just downgraded Demand Media Inc ((NYSE: DMD) from Neutral to Sell and cut its price target from $12 to $9.

Goldman Sachs commented,:

“Demand Media has proven vulnerable to changes made by Google in the past, the Panda algorithm change in 3Q11 being the most significant example as it drove owned and operated content revenue down 3% yoy in 1Q12.

“In 3Q12 and more significantly in 4Q, DMD began a traffic-driving strategy to eHow search pages, which could yield a near-term increase in traffic that we view as unsustainable longer term.

“DMD’s O&O properties represent roughly 50% of net revenue and eHow representing 46% of total traffic, according to comScore, has been a contributor to growth with traffic accelerating to +35%  in 3Q. ”

“With competition increasing for keywords, and paid traffic apparently responsible for much of the acceleration in growth we’ve seen in recent quarters, we believe revenue estimates for 2013 are too high.”

Demand Media closed at $9.23 on Monday and are down over 7% at $8.56 after the downgrade