VentureBeat

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.

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.

Auctomatic 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.

Auctomatic wants to make it easier for eBay’s most active sellers to manage sales. The San Francisco-based company launched its public beta yesterday.

So-called “powersellers” range from self-employed individuals to large firms like Dell. EBay doesn’t offer all the tools needed to manage the process of selling a lot of merchandise at once.

A range of third parties provide software tools designed to streamline the process. The largest, ChannelAdvisor, raised $30 million in May from New Enterprise Associates and other firms.

Below, Kulveer Taggar and Patrick Collison of Auctomatic tell me how they plan to compete against ChannelAdviser and other existing tool-providers.

Auctomatic has raised more than $400,000 in seed money from Y Combinator and other investors, including Paul Buchheit, creator of Google’s Gmail service.

VentureBeat: What’s wrong with the seller experience, as is? Since eBay is so big and established, why hasn’t it solved the problem already?

Kulveer Taggar: The eBay website works fine for the one-off sellers (which is what it was built for). As soon as anyone gets serious about selling, then they have to find software that helps them manage their inventory, listings, feedback, shipping, images, and so on.

To the second part of the question, there’s a big market of tools built around their platform (including eBay’s own tools — companies they purchased), but there’s lots of opportunity internationally, for seller optimization, and the ongoing efforts of Amazon and Google in e-commerce.

VB: How is this a big problem and what are you doing differently — since there are other third-party powerseller tool providers?

KT: Power-sellers bring in over $1 billion per month in gross merchandise value in the US alone. There are third parties that provide tools and make in the millions of revenue, but people tell us our user interface is a big improvement. Also, our back-end technology allows us to build new features much faster than the others.

For example, nobody builds good statistics support — the big toolmakers require that you use software provided by other third parties, and then manually cross-reference the results. We automatically generate statistics based on every view of any of your auctions, and integrate the results of that analysis into the app.

Patrick Collison: Ultimately, we want to rapidly build whatever it is that power-sellers need.

To do this, we use a lot of Smalltalk [a relatively obscure language; database startup Dabble DB is perhaps the best-known example of its use on the web]. Ultimately, it all comes down to being able to iterate and react faster, and Smalltalk puts us in a good position to do this — with our technology stack, we’re pretty confident we can out-develop our biggest competitor (which has more than 100 developers).

In Smalltalk, things that they’ve had for decades but are still absent elsewhere (like the interactive environment) really to turn out to be a big deal. A good example of this is data importing from eBay or other third party tools. It’s an inexact science. If someone encounters a problem importing their data (i.e., something we haven’t seen before in a test environment), instead of just giving up, we can log into their account and run a debug session right there and then, as they’re waiting on their browser to complete the request.

Or take international support. It has taken most of our competitors years to get anywhere with it. We implemented it in less than a week.

We definitely had to invest more in the set up — it’s not Rails [a popular programming language], where it’s most all ready for you. We had to build a lot of it ourself, and that took some time — but we’re definitely glad that we did.

VB: There’s a lot of buzz — at least in Silicon Valley — about developer platforms, at least for social networks. How’s eBay’s e-commerce platform for third parties?

KT: The last numbers I saw were that 56% of all ebay.com listings come through the API [application programming interface] and this number itself is growing at 27 percent, year-over-year. EBay’s international API markets are still open for growth, for a tools company like us.

I’d say that growth in API usage is because of the maturing of the platform (it’s been around for many years) and that the platform companies are doing better: There are now lots of people making money off the eBay platform, meaning there’s a lot of business for us to tap into. [Note: eBay as a company is doing quite well, aside from the write-down on Skype last quarter.]

In the early days, eBay couldn’t make up its mind about being a platform. They would charge for the API. That’s all changed: The API became free in 2005 and eBay made the decision that they were not really a software company, though on that last point, that’s my speculation.

Ultimately, I think they realise that having an open platform benefits them because it translates to more activity. Now, there’s a lot of internal support for the platform, with more resources being allocated towards it.

VB: Do you think any other marketplaces will be able to compete against this move? Example: what if Amazon decides to offer a competing marketplace? What about Facebook’s new API for its marketplace? How would that affect you? Would you look to integrate powerseller tools with other such marketplaces?

KT: I hear that Amazon is going to get aggressive with the “Merchants at Amazon” program, which will replace their marketplace. We’d definitely look to integrate with those marketplaces.

Facebook marketplace: It’d be interesting to experiment with different ways of making e-commerce [applications that make use of Facebook's social data.] We may apply to the FB Fund to that end [a Facebook-run grant program to finance outside developers in building interesting new applications on the site].

This talk of platforms should also include Google. We spoke to some of their people at eBay Live and they were very keen for us to integrate with Google Product Search — I’ve heard that 30 percent of all their searches are product searches. With google, it’d be interesting to let power-sellers buy their own traffic, though that’s likely a long way off for us.

VB: Tell me more about the international market, especially versus the US market. What are you seeing and how are you adapting?

KT: I think international users have been less well served by the other third-party tools companies as obviously the US companies have targeted the US market, which is about 50 percent of eBay overall.

So yes, a customised solution for UK/Ireland, Germany, India and other markets is a distinct possibility. We know of some British power-sellers who pay hundreds of pounds to have their accounts sync with eBay because all the US solutions obviously work with US accounting software. That’s a pain we’re looking to eliminate.

[Disclosure: I am personal friends with people in the company.]

Here’s the latest action (updated):

Google exposes China’s new submarine — Google Earth has exposed China’s new ballistic missile submarine, revealing its large missile compartment. Strategic Security Blog has the scoop. These sorts of images are usually kept secret by governments, and the Chinese are likely to be unhappy. It comes after Google offended India for exposing its air force bases and parliament, fearful as it was of exploitation by neighbor and enemy Pakistan.

Microsoft opening Internet services to developers — It also will create infrastructure services, such as storage and alerts, that developers can build on top of (CNET).

Facebook not gaining on Myspace — This, according to latest Comscore numbers sent out by MySpace today. Facebook hasn’t made any inroads on MySpace in total number of unique users, despite the substantial publicity boost Facebook got with the announcement of its open platform for developers. See table below. Facebook’s page views actually declined in June, though that’s likely because Facebook is college-dependent and the school term is out.

.

WeShow: Humans needed to sort through the video crud — First we saw Mahalo, the search engine launch with human editors to cut out the spam and other junk from results found at search engines like Google. Now there’s New York’s human-edited video site WeShow. The site, which launched Tuesday, uses people to select the best videos from sites such as YouTube, DailyMotion, Metacafe, Google Video and others. It has backing from the Pilot Group, owned by Bob Pittman, ex-COO of AOL Time Warner; and Bill Sahlman, of Harvard Business School. (Techcrunch.) Funding rumored between $5-7 million.

Musetorm, which manages media over widgets, raises $1 million — We wrote about Tel Aviv, Israel company Musestorm earlier this week, for its innovative way of letting publishers manage their content delivered to widgets. We’re told it has more up its sleeve, and we’re looking forward to reporting on it. Meantime, it has raised $1 million from Elron Electronic Industries, a public company. In return, it gives Elron a 23 percent stake in the company. Customers include The Washington Post, Pageflakes and CBS. It plans to make money by charging for its traffic analytics.

Bay Area millionaires on decline — The number of North American households with at least $1 million in investable assets (not including home equity) rose sharply last year, growing by 10 percent. But in the Bay Area, it fell by 0.37 percent to 111,190, according to the World Wealth Report produced by Merrill Lynch and Capgemini. (MSNBC)

Downfly lets you send and track Web page links easily — GigaOm reports on the Firefox extension that allows you to email web page links to friends, without having to cut-and-paste the URL. You can then track where those links go, i.e., if your friends forward them to others.

Auctomatic, for eBay power-sellers, to launch in two or three weeks – The start-up, funded with at least $400,000 seed money from Y Combinator and other investors, including Paul Bucheit, creator of Google’s Gmail service, seeks to cater to big sellers. These power-sellers typically churn hundreds of listings a day. But eBay makes sellers slog through five pages to create a listing. So Auctomatic reduces the complexity, providing a single page for the process, and adding other management features at a lower cost than other services. The Irish Times has a story on them. It is behind a firewall, but here’s a readable copy, via the company’s blog.

VC/Investor Tax debate continued — The debate about whether to raise taxes on investment professionals such as VCs and buyout professionals rages on. Congressional ire appears directed toward the buyout professionals, however. The Senate Finance Committee chairman, Max Baucus, said he wants to find out “whether some people who are earning great wealth are also avoiding their full and proper share of the burden of taxation.” Referring to the Blackstone Group, the buyout firm that went public recently after throwing a lavish party with $300 stone crab, Baucus said there’s “a good argument that the fund managers who are becoming publicly traded partnerships are stretching the law.”