March 26, 2008

Communicate Acquires Y Combinator Startup Auctomatic, Unveils New Business Strategy

Michael Arrington

41 comments »

Communicate.com, a public company in Vancouver, Canada, is announcing the acquisition of Y Combinator startup Auctomatic this morning for $5 million in cash and stock. The company is also changing its name to Live Current Media, Inc.

Communicate/Live Current is in the domain name business - their primary assets are 800 high value domains (perfume.com, cricket.com, etc.) that generate a variety of advertising and affiliate fee revenues. The company’s market cap is just shy of $60 million. That stock price has increased by around 250% in the last year.

Some of those domain names are quite valuable. The company declined to sell cricket.com for $6 million earlier this year, for example. About 40 of the company’s 800 domain names are “very high quality” CEO Geoffrey Hampson told me in an interview last week.

The company is going to focus on building out branded properties around those domain names, Hampson said, starting with Perfume.com. The Auctomatic shopping engine technology will be a big part of the push, and the company will also add social features over time.

Demand Media is another domain name holder that is trying to create new revenue streams around domains sitting in inventory. Last year they launched a semi-distributed social network called me.tv to spur the purchase of .tv domain names. No word on how that project is doing.

Will this work? I don’t know and I’m not even sure I’ll remember to check in on them. The domain business is a cash cow but isn’t exactly exciting stuff. Hopefully the Auctomatic founders, who must leave Silicon Valley and move to Vancouver as part of the transaction, will be able to pry themselves loose at some point in the future and start another company. For now, though, congratulations to them. And to their backers, Y Combinator, Paul Buchheit and Chris Sacca.

CrunchBase Information

Live Current Media

Auctomatic

Information provided by CrunchBase

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Comments

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YDrive

March 26th, 2008 at 4:50 am

Interesting… Y Combinator should be somewhat delighted..

That said, would be quite curious as to how much Yahoo! acquired YMail.com (if Yahoo! did indeed acquire that, and if probably recently perhaps?…)
Mystery CEO

March 26th, 2008 at 4:52 am

Domaining is becoming so huge lately - there are multiple companies in the US also that are collecting with plans of going public.

But, you’re right - not sexy at all…are there any US based public companies that just collect domain names?

I do remember hearing someone in Silicon Valley who had raised hundreds of millions to do this?

Mystery CEO
Faramarz

March 26th, 2008 at 4:56 am

For a second after clicking the link, i thought i landed on 37signals website. damn the similarities are striking!

anyway, nice to see some positive light on Canadian techies
Kevin Allman

March 26th, 2008 at 5:00 am

this is good for ycombinator…should attract more startups to them….
congrats to auctomatic on the acquisition
diystartupnews.com

March 26th, 2008 at 5:10 am

congratz all round. I wonder how long those founders will stay and if they are locked in.
Damien Mulley

March 26th, 2008 at 5:33 am

Well done Patrick, John, Harj and Kul.
DC Crowley

March 26th, 2008 at 5:37 am

Congrats to Patrick and John Collison. Saw you guys on the live ustream.tv at Limerick Open Coffee last august. Really impressive!
lawrence

March 26th, 2008 at 5:48 am

owning a good, single, keyword .com domain name has got to be the pefectest business in the World.

acquire it, create an ad account, and with all the direct type-ins - the rest is history.
…no marketing, staff, maintaining, etc - no overhead.
MikeT

March 26th, 2008 at 6:20 am

Paul Graham knows something that others don’t.
That’s why I read and read again his essays.
For web entrepreneurs, he should be like Warren Buffett for investors: don’t just read - analyze his essays!
I hope he keeps sharing his knowledge with others through books and essays.

And congrats on the Auctomatic deal!
Michael Bakovic

March 26th, 2008 at 6:21 am

Congrats!

-Check out my site for ways to make money online http://mikesmoneyclub.blogspot.com/
Drew Houston

March 26th, 2008 at 6:38 am

congrats to the auctomatic guys!
Conor O'Neill

March 26th, 2008 at 7:19 am

I’m delighted for the Collison brothers and the rest of the team. A lot of us in startups in Ireland are so impressed that these young guys headed to SV and had such success so quickly. Well done all.
Boris Mann

March 26th, 2008 at 7:28 am

Part of the Auctomatic team already lives here in Vancouver. While Communicate’s current portfolio is domain names, they now have a great tech team to do lots of interesting things.
Simplebucket

March 26th, 2008 at 7:29 am

Not trying to put the founders down, but $5M for what the state of their startup/software/website just seems way too much. From the crunchbase information, their traffic doesn’t look very promising, but ok, you can will say this is not an user acquisitions, but looking at Auctomatic, it looked like something that can be written with a couple of really good hackers in 3 months. So their software is perhaps worth $200k - $300k.

Again kudos to Paul & Chris for getting it done through YC and getting to a great exit!
alan p

March 26th, 2008 at 7:59 am

Tough gig, going to Vancouver ;-). Well done.
LOL

March 26th, 2008 at 8:01 am

Hilarious. As I just saw on another site, “Was someone at Communicate.com smoking crack?” Guys I’m talking to in Palo and SF finding this so funny that someone actually took the bait.

The founders of Auctomatic, Harj and Kulveer Taggar, are in the same Oxbridge clique as the YouNoodle guys, entering the Valley with some godawful website, using self-congratulatory self-written articles leveraging their PR contacts and guys they sucked up to to overhype and overspin their creations out of control.

Resultantly, someone was going to inevitably fall for the hype and bite.

$5m for http://www.Auctomatic.com? Look at the website. No chance whatsoever they’ll recover anywhere near $5m in profit over a 10yr horizon, which should be any tech acquirer’s key metric.

Feel sorry for the dopes at Communicate who fell for the hype, and are now sitting on an unprofitable one trick pony. Fortunately me and my investment friends in Palo/SF take more than a “We went to Oxbridge therefore lick my boots” approach to valuing non-profit websites!

Ha
Sam Purtill

March 26th, 2008 at 8:40 am

Congrats kul, harj, patrick — that was fast
Harj

March 26th, 2008 at 8:47 am

Thanks for the congrats everyone, much appreciated.
SmartFolders

March 26th, 2008 at 8:55 am

I think there is some internal backscratching going on. You buy my company for $5mil I’ll buy X.com of yours $5mil. It’s a wash for both of us, but the public shareholder is out the silly valuation of the website.
xavierv

March 26th, 2008 at 8:56 am

I’m not quite sure why Auctomatic didn’t stay independent longer to add more value to their startup, but this is great news. Congratulations to them. Video
Job Board News

March 26th, 2008 at 9:14 am

doesn’t auctomatic seem like a strange tangent for communicate? what’s the link to domain development?

domains are as important as they are boring (to some)…
Workpost

March 26th, 2008 at 9:25 am

“Harjeet Taggar… Thinker of Stuff” lol. That’s the best job in the world right there. Thinker of stuff.
jro

March 26th, 2008 at 9:58 am

“The domain business is a cash cow but isn’t exactly exciting stuff.”

I’ve found I’m rarely bored collecting cash.
mark

March 26th, 2008 at 10:32 am

I guess excitement is in the eye of the beholder
all depends on what you do with the cash
Sean

March 26th, 2008 at 11:25 am

Mike,

They also own Body.com, Cologne.com and Karate.com

Let me know if you need an entire list of all of their domains.

-Sean
Trevor Plantagenet

March 26th, 2008 at 11:28 am

Most people in the valley aren’t aware of the true nature of “public” Vancouver companies. At best, going public in Vancouver is like VC-financing in the US, but typically is more about pump-and-dump schemes. If this deal was a stock-swap, which is the typical nature of these deals where one of these Vancouver companies does an acquisition, then Y-Combinator and the Auctomatic team will have to be extremely vigilant to see if they’re able to actually turn any of those shares into real money.
Rich Miller

March 26th, 2008 at 11:49 am

Yes, $5 million seems like an awful lot of money for this site/app. But Communicate has bought not just the one eBay businesss, but the shopping engine technology as well. It’s not rocket science, but it may speed their ability to monetize domains. Domain-based businesses typically want to monetize sites at scale. My guess is they use Auctomatic’s framework to create hundreds of niche vertical shopping portals. Some could focus on eBay categories (quick and dirty, little code to change) and others might harness feeds from affiliate portals like Commission Junction or ShareASale.
mark

March 26th, 2008 at 1:34 pm

This is a company I’ve followed for years, because I follow the domain business closely, as boring as it may be to some (due to my own domain portfolio). While it may be true there are many OTC/pinksheet companies out of vancouver that exist to only print and sell shares of stock to earn revenue via dilution, Communicate.com has not been one of them.

If you are willing to invest a couple of minutes in some research they are a reporting company, and file financials (unlike many bulletin board companies)

here is a recent filing which shows their financials up through 3rdQ last year.
http://www.pinksheets.com/edga.....ID=5553987
secret weapon

March 26th, 2008 at 2:14 pm

genius hucksterism on the part of the auctomatic guys - sell garbage to idiots with too much money. bravo! at least they have to go to vancouver… two fewer douchebags in bay area.
Idiot CEO

March 26th, 2008 at 7:01 pm

Man if I had a $5 million dollar exit for every failed website I’ve created I’d be rich. These guys couldn’t even get eBay sellers to use their site for free. Why on earth would someone buy that crap. If I owned stock in that company I’d sell every share and short it.

Reading over the Auctomatic founders blogs and twitters they spent more time on vacation than they did working on that piece of dump. They must have been out shopping it around as soon as they knew it was going to be a failure. Which had to have been almost from the day they founded it.

I’ve heard that BC bud was strong stuff but apparently it’s REALLY REALLY strong stuff. Lol.

Please provide more info and details on who put this deal together because I seriously want to hire them. If they can get $5 million for garbage they can probably make me a couple hundred million for the multimillion dollar profits my company pulls in a year.

And the founders aren’t even smart. Seriously, who gets into the eBay 3rd party space. There is no money to be made there. My guess is when the dumbomatic founders figured that out they spent every second of their waking hours trying to figure out who they could unload this thing to.

I have to ask all the people who are congratulating these guys what they are thinking. I guess most of the people that read Tech Crunch must have a pretty low IQ. I’d like to give props to those smart enough to call this deal what it is, which is crap.

And what is this shopping engine they bought? They bought a 3rd party listing tool for eBay. There are probably like 200 of those. Lol. Garbage. Not only that they bought a complete failure of a 3rd party eBay lister tool.

God I love Tech Crunch. When I read this stuff it gives me hope I can find some jackass to pay me off with a monster payday.
MikeT

March 26th, 2008 at 8:00 pm

@ Idiot CEO: my congrats go to whoever built something, however bad it is, and got a nice exit. It does not matter that the product is crap, it does not matter that it looks like crap, and that whoever put it together spent maybe a month or two on building it. The fact is, they got 15k in funding, some free advice, and then sold it for 5M. Now that’s a cool return, and what generated it is not that important.
The numbers speak for themselves and the guys deserve kudos for that.
Idiot CEO

March 27th, 2008 at 12:01 am

It says they took $400k. I think the $15k must have been the Y Crapinator money.

http://www.crunchbase.com/company/auctomatic

In any case this is a dream situation for a company that was otherwise looking at the deadpool but instead won the lottery. I guess there is a lesson in there somewhere.
Rezadior

March 27th, 2008 at 2:29 am

Errrm-

http://news.bbc.co.uk/2/hi/business/7315598.stm

“We could immediately see that to negotiate well you have to be able to bluff successfully.”

So they bluffed (ie exaggerated or plain lied) about their empty website to clinch this deal?

Heh, LiveCurrent are in for such a shock…
Kulveer

March 27th, 2008 at 7:00 am

@Rezadior

Hmm…not quite, that was actually more in context of our other negotiations.

Also, it was more a general “if you’re not willing to walk away from a deal, you’ll never get a good one” sentiment. This is actually a really hard lesson to learn. For example, for even investors who are essentially on your side, the default is to give them all the concessions they ask for. It takes a small amount of guts to turn around and say no, and risk losing everything.

Finally - our tech and team has been through successful due diligence with three companies, so, it’s not quite an empty website. All the metrics were laid bare, so no surprises, unfortunately.

@MikeT we raised in total $600k.

…did I take the bait? Sigh.
P.T. Barnum

March 27th, 2008 at 1:48 pm

Due dilligence means nothing outside of perhaps Google. The company will outsource the process to team of bored, washed up former engineers ask you some questions. Maybe if they are serious buttholes they look at the code - but not usually. They may or may not investigate the team, it really depends on how bored they are. If the company is even dumber, they will try to do it themselves. The only places the due dilligence process is serious these days are google and microsoft.

However, the important lesson to learn is that if you have a lame website, the key is to find the richest, yet most unlikely and least competent buyer.