The new company, to be called Koz.com, will combine revenue streams in online advertising, e-commerce transactions and licensing services under one roof. Both privately held companies have courted local newspapers and media companies as well as local online merchants and communities as partners.
As part of the merger announcement, the new company has secured an additional $16.2 million in financing from existing investors, including CMGI @Ventures, Tribune Interactive and BancBoston Ventures.
Linda McCutcheon, CEO of Internet Tradeline and former president of Time Inc.'s new media division, will become CEO of the combined company. Michael Moran, CEO of Koz.com, will become president and chief operating officer when the merger closes.
The merger is expected to close Sept. 7. Terms of the deal were not disclosed.
Koz.com is a community publisher that sells advertising and licenses its tools to other Web sites. The company allows sites to offer community features, such as chat rooms, message boards and personal home pages, to their customers.
Internet Tradeline builds online shopping services for local Web sites and merchants. The company has built shopping services for newspaper Web efforts, including those from Knight-Ridder, The New York Times and The Los Angeles Times.
"We're focused on taking publishing elements and transaction capabilities and merging them around local online communities," Moran said in an interview.
The merger comes as Internet companies face a wave of consolidation. The once lengthy list of Internet businesses has rapidly shrunk in recent months because of poor market conditions, acquisitions and failures.
Toysmart.com and Boo.com are among the many e-tailers that have closed shop because of sagging revenues. Other Web companies that focus on different markets have joined forces in hopes of expanding their revenue bases. Among the notable deals in recent weeks is the acquisition of Web site network Go2Net by content-delivery service InfoSpace for $2.67 billion.
Although Koz.com and Internet Tradeline are considerably smaller companies, executives expect the merger to expand their revenues and market reach.
The company expects to reach $30 million to $40 million in revenues by 2001 and to reach profitability within 12 months, McCutcheon said in an interview. The draw for the new company will be to provide essential tools that all Web sites need, she said.
"We take advantage of the natural instinct on the part of everyone who realizes they must have a robust Web presence," McCutcheon said. "If they can find the right partner to outsource it in terms of publishing tools, community, chat and commerce, they've gone a long way to solve their infrastructure problem."
In addition to the merger, the companies said they will spin off their chat software service, Ichat, into a separate company. Moran will become CEO of Ichat after the spinoff.