.CO Internet is a company cool enough for Brooklyn hipsters

AUSTIN,Texas--If you haven't heard of Juan Diego Calle's company quite yet, consider yourself not among the in-the-know here over the last few days.

Yes, the buzz at this year's South by Southwest Interactive has been around social apps like Highlight and Glancee hoping for a Twitter-like breakout. But there's another hot startup here that gets little press and yet is everywhere.

I'm referring to .CO Internet, the Miami company that fought hard to land a contract with the government of Colombia so it could commercialize the country's top-level-domain, or TLD.

At last year's SXSW, founder and CEO Calle could barely get a party invite. This year, he was hobnobbing and sharing stages with the likes of Reid Hoffman, Steve Case, and big-time angel investor Dave McClure of 500Startups.

More importantly to Calle is that evidence of his efforts are everywhere: Case has rebranded his Startup America Partnership to S.co, and a slew of startups here--Bumpercrop.co, Tailored.co, Gourmair.co, Cardflick.co--are proudly displaying their .co brand.

"Someone came up to me and said, 'You guys are like Brooklyn,'" Calle told me during a packed SXSW party that he was sponsoring with Tech Cocktail to showcase startups. "'You're like where the cool guys in N.Y. want to be.'"

Taking advantage of the domain shortage
There's one obvious reason that so many startups are building their Web sites on .co domains: the good .com names are long gone. Coming up with a company name is hard enough. Finding an available domain nearly impossible. They're either in use or, more likely, have been snapped up by domain investors (let's save the term cybersquatter for those going after trademark names) betting that a deep-pocketed buyer would come along.

That issue alone--domain holders demanding huge prices--helped fuel the trend of offbeat and often odd names of many of the Web 2.0 startups. It's why Digg had an extra "g" and Flickr was missing an "e."

Yet the domain shortage is only part of the explanation for .co's success. Calle has made an concerted effort to define .co as a place that new startups would want to hang their virtual shingle--if not Brooklyn cool, certainly Silicon Valley cool.

Early on, for instance, he gave "T.co" to Twitter to use as it's URL shortener, which the folks at Twitter were eager to do. He did a deal with AngelList, a thriving service for connecting startup founders and investors that now uses Angel.co. McClure's 500Startups runs on 500.co, Jason Calcanis's Launch runs on Launch.co, and on and on. These are influential places to spread your message.

The one black eye on .CO Internet's resume came when Overstock, which paid $350,000 for O.co and rebranded the businesses, decided to retreat to Overstock.com--an effort that hurt .co's image but that Calle blames on Overstock.com's marketing missteps.

Keeping prices high
.CO Internet spends a lot on marketing, hosting parties here and elsewhere, and advertising during last two Super Bowls. But Calle has not gone after the mass market by pushing cheap prices.

He has, in fact, intentionally set the prices higher than other domain extensions as a way of discouraging speculators from hoarding thousands or tens of thousands of names, as many so-called domainers do with .com names.

Calle set the wholesale price at $20--before they get marked up by registrars such as GoDaddy. By contrast, Versign, the registry that runs the .com extension, just raised the wholesale price of a .com name from $7.34 to $7.85.

"If you're a domain squatter, doing that on .co is three times more expensive than a .com," said Calle. "We control the pricing. It's about getting quality sites built...We don't want to create a domain ghetto."

It's also, of course, about making money. Since .co rolled out to the public in July 2010, about 1.3 million have been registered. That might not sound like a lot considering there are some 100 million .com names registered. But compared with some other TLD efforts--remember .mobi?--it's a smashing success.

Calle said the company's revenue for the past 12 months is about $25 million, which is an impressive number when you consider the names have only been available since for a year and half. The business is already profitable, he said, although he won't share details.

Working with Colombia
Calle's first success grew out of the 1990s boom. He founded TeRespondo, which was a pay-per-click search advertising network that was big in Brazil, Mexico, and Argentina. It ended up going bankrupt with the dot-bust in 2000 but then had a comeback of sorts that resulted in a sale to Yahoo in 2005 for an undisclosed amount.

During that time, he quickly learned the value and difficulty of getting a good domain name. Shortly after he sold the company, someone mentioned to him that Colombia--Calle's native country--was essentially sitting on Internet gold and doing little with it. The big appeal was that .co suggests company, and thus provided a decent alternative to .com.

The .co name was in use, but it was only available to companies in Colombia and the names all had awkward addresses like Coffee.com.co. In addition, the process to register a name was laborious.

The domain business was taking off around then, as the PPC networks of Yahoo and Google were making static, ad-filled pages incredibly lucrative, as I wrote about in this article. Some big domain operators, such as this one I wrote about in 2007, even tried to do deals with Colombia but never had any luck.

Calle persisted, and after dealing with several government agencies, managed to put together a bid to run the .co extension as a commercial business. He went toe-to-toe with the far larger Versign. (Another bidder had dropped out).

And in August 2009, the Ministry of Communications of the Republic of Colombia awarded the contract to .CO Internet. "The day we submitted our proposal and the day it was awarded were highlights of my life," said Calle.

Now, not even three years later, in his own way he's making his mark on the development of the Web--and that's why he was everywhere to be seen around Austin at SXSW.

"This is where ideas are being born," said Calle. "We want to be at the point of inception."