How will Google's upcoming algorithm changes targeting content farms impact Demand Media?

Depends on how Google wants to solve the problem. Demand probably has the biggest bullseye on its back in terms of public perception, but they are just a symptom of a much broader debate. Google has, IMO, 3 ways to go about doing this:

1. Turn down the weight of domain trust as a ranking factor. Over the last 18 months or so, they have gone the other direction and increased the weight of domain trust as a way to push "brands" to the forefront of search results instead of the little guys. Up to that point, they were predominantly worried with small-time content spammers who wouldn't have the tools to build a brand, but who did have the tools to use technology to create a lot of low-value content.

2. Sniper shots on specific domains. It's really pretty easy for them to de-weight specific domains and url's rather than risk a lot of collateral damage with a broader-based algorithmic approach to the index. There's a lot of talk of users being able to blacklist domains in the search results going forward, so you might see those actions used to corroborate the whims of the Search Quality team.

3. Increase the requirement for citation. Right now a lot of those eHow, Associated Content, article marketing sites, etc. have content ranking mostly due to their domain trust and "brand". If Google increased the requirement for content to have more citation signals in order for a piece of content to rank, it would still allow for brands to compete above the little guys, but also keep the brands honest on per-content performance. By citation signals, I am referring to backlinks, tweets, Facebook shares/likes, Stumbleupon, etc.