Communicate.com buys e-commerce startup Auctomatic, to relaunch top domains

Communicate.com, a domain registrar turned e-commerce network that at least one analyst thinks is seriously undervalued, is making some rebranding and technology moves today.

The fourteen year old company owns popular domain names like Perfume.com, Cricket.com, Brazil.com and Vietnam.com and now its going to build destination sites to match, under a new brand, Live Current Media. Until now, it has not offered more than a bare minimum of services. Perfume.com, for example, is a rather shabby perfume e-commerce site.

live032608.png With top domain names like Business.com selling for around $350 million, Communicate batch of domains is worth something. Some of the domains see millions of pageviews from people presumably trying to type a search in a search bar — especially to its perfume site, around Christmas. Meanwhile, this investor estimates the company’s assets (basically, its domains) are worth $68 million but that it could sell for higher — and that its value may nearly triple within a few years. A domain like Perfume.com, for example, already brings in $10 million a year, with minimal effort.

So publicly-traded Communicate, based in Vancouver, British Columbia is making moves. On top of its branding relaunch, it has also bought San Francisco-based Auctomatic, a startup that offers auction software to power sellers on eBay and other e-commerce sites, for $5 million in cash and stock.

aucto032608.pngAuctomatic will move up to Vancouver and form the backbone of Communicate’s technical staff, with Auctomatic founders getting leading roles in developing the Communicate sites. Check out the interview with cofounder Harjeet Taggar, below the story, for more information on the sale and the company’s plans.

Auctomatic itself has been through an interesting ride over the last couple of years. It launched in 2005 as a sort of eBay for your college marketplace, created by two students, cousins Harjeet and Kulveer Taggar. The site eventually raised a seed round of funding from Y Combinator in the winter of 2007. That spring, it relaunched as a company offering auction-management software, for e-commerce sellers. Through a Y Combinator-brokered introduction, the cousins added a pair of brothers from Ireland to the founding team, Patrick and John Collison. [And, full disclosure: The group's next employee was Phil Kast, one of my cofounders at a startup called Writewith.]

Although Auctomatic launched last fall and said it had been doing well reaching its target users, it had been talking with potential acquirers for some time. Besides Y Combinator, Auctomatic also received funding from angel investors including Gmail (and FriendFeed creator) Paul Buchheit, and Chris Sacca, a former Google leader recently turned angel investor.

VentureBeat: You’ve said you were getting looked at by some big-name potential acquirers in Silicon Valley? Why did you sell to communicate.com? Why is it a good fit?

Harjeet Taggar: So for us Auctomatic was always a first step into e-commerce, we wanted to work with sellers to see what their pain points were and see what happened when we started fixing them. We realized pretty quickly that what sellers want more than anything are buyers, Communicate has sites that have targeted buyer traffic coming to them, like perfume.com.

VB: So you guys will provide the tech core at Communicate?

HT: Yep, we’ll start out by plugging our seller interface into what they have. That’ll be a good starting point. And then we’ll start expanding out to improving the buyer side of things as well.

VB: Why did you guys sell now instead of raising another round?

HT: Well we were literally in the middle of putting together an angel round when communicate first came in, initially we were going to stick with our plan to get more angel. But for us, we felt that Auctomatic was going well but Communicate was the best answer to the “whats the next step” question. We sold to Communicate because we think that’s where the Auctomatic product fits in best.

Another reason we sold to Communicate is because they’re in this unique situation. They’re a public company and have all the resources that come with that but in terms of numbers, they’re small so we’re going in as part of the senior management team and have real direct input in how we build out Auctomatic. That autonomy/freedom was important to us.

VB: Did you guys have any larger concerns about selling before a recession results in companies having less money for acquisitions? More job security vs. risk?

HT: The recession itself wasn’t really such a big factor initially (we started our first negotiations almost 6 months ago so the recession talk wasn’t as full blown as it is now) but the utility of this first bit of money for us as founders is of course a big deal.

VB: Yeah, but this deal locks you up for how many years?

HT: We’re happy, we view this as continuing to work on Auctomatic — just with more resources — so it’s fine.

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