The privately held, San Francisco-based affinity portals will maintain both Web sites and brands, offering advertisers a combined audience of 3.5 million monthly visitors and 1.6 million registered visitors, according to the companies.
"Both are really strong portals in their own right," Megan Smith, chief executive of PlanetOut, said in an interview. "Each has innovated its content, community and commerce offerings in ways that are highly complementary. We plan to integrate the business operations of the companies so that each of the product groups can thrive. The merger will allow us to put even more resources into the distinct products."
PlanetOut and Online Partners, Gay.com's parent company, have been in negotiations since September. As reported earlier, negotiators have been mulling either a merger or a strategic alliance.
With Smith and her Gay.com counterpart Lowell Selvin pushing for the merger over the strategic alliance, the boards agreed to sign a merger pact in the next few days.
The companies are billing it as a merger of equals. While Selvin will be CEO of the merged company and Smith will become president, the board of directors will be evenly split between board members of the two start-ups.
Gay.com board president David Bohnett, who founded GeoCities and oversaw its sale to Yahoo, and PlanetOut board member Kathy Levinson, former president and chief operating officer of E*Trade, will co-chair the board of the new company, to be called PlanetOut Partners.
Financial details of the all-stock transaction were not disclosed.
PlanetOut and Gay.com have both garnered tens of millions of dollars from investors placing their bets on the potentially lucrative gay and lesbian online advertising market.
Online Partners merged Gay.com and Gay.net in March 1999 to form the Gay.com Network. This February the site attracted 2.3 million unique monthly visitors who made 9 million visits lasting an average of 33 minutes each, according to Gay.com.
The start-up secured a significant round of funding just before the April downturn in investors' enthusiasm for dot-coms. In March it raised $23 million from investors including Flatiron Partners, Chase Capital Partners, Macluan Digital Partners, Baroda Ventures, Jesse.Hansen.CoVe, IDG Ventures and Times Company Digital, the Internet division of The New York Times Co.
Launched in 1995, PlanetOut has 700,000 registered members. The company in September raised $10 million in a third round of funding. Investors include the Mayfield Fund, America Online Investments and Eden Capital, based in the United Kingdom. Individual investors include RealNetworks chief executive Rob Glaser.
While targeting the same demographic, the sites bring potentially complementary assets to the negotiating table. PlanetOut has a strong content identity, especially with its pending acquisition of gay print media company Liberation Publications, which publishes The Advocate and Out magazines. PlanetOut recently completed the acquisition of gay and lesbian travel information company Out & About.
Gay.com, by contrast, is known for its community applications, including chat and personals ad profiles.
Together, the companies hope to take advantage of a common "corporate backbone," Smith said, as well as the ability to approach advertisers and commerce partners with a larger audience and a field stripped of direct competition for the gay and lesbian market.
The companies expect to merge by the end of the year, pending shareholder approval.