Small Net auction company goes for Gold's

Biloxi, Miss.-based start-up Dutchbid.com, which is hosting a controversial auction by hacker Kevin Mitnick, has signed a letter of intent to acquire the recently defunct online auction site. As part of the pending agreement, Dutchbid has already begun displaying Gold's logo on its site and is in the process of redirecting Gold's visitors to Dutchbid.

With the deal, Dutchbid will more than quadruple its registered member base, Dutchbid president Eric Rosenberg said.

Gold's "had a very close-knit community; that's something that any online auction site would desire," Rosenberg said. "We saw the opportunity to give that community a home that would benefit both Dutchbid and the community members that were left homeless."

Meanwhile, the deal will allow the efforts of Gold's founders--to create a community auction site--to continue, said Ed Lechner, a Gold's spokesman. Gold's Internet service provider closed the site last week because of outstanding debts.

"We all wanted to move as quickly as possible to help the users find a new home," Lechner said. Gold's "is a beautiful husband-and-wife start-up that failed. Hopefully Eric and his people can carry on the concept and have a better chance of succeeding."

Both companies declined to give the financial details of the pending deal. The deal should be completed in the next month, Rosenberg said; however, Lechner indicated that the two sides could close the deal within the next several days.

The deal comes amid growing consolidation and closures among e-commerce and other Web-related companies. Tuesday, offline pet supply giant Petco bought the assets of Petopia.com. And last week, CMGI shut down its iCast entertainment site.

Under the proposed deal, Gold's will transfer its member database, logo, domain name, and member feedback ratings to Dutchbid. Rosenberg declined to say what will happen with Gold's founders or employees, but Lechner said under the agreement, they will have the opportunity to work for Dutchbid.

Dutchbid has some 8,000 registered members, only 400 of which were also members of Gold's, which had some 26,000 registered members when it closed. So far, most Gold's members seem to be receptive to the deal, both sides said.

"We, the community at GoldsAuction.com, are celebrating what we feel is a miracle for our 'home,'" one Gold's member said in an email to CNET News.com.

But the two companies could face troubling privacy questions concerning the transfer of Gold's member database. Earlier this week, privacy groups asked the Federal Trade Commission to investigate Amazon.com's privacy policy.

Recently changed, Amazon's new privacy policy would allow it to transfer its member lists in case the company is bought or sells one of its assets, such as its Alexa Internet division. The privacy groups are asking the FTC to force Amazon to stick to its previous policy, which would bar it from transferring any customer information under most circumstances.

Privacy concerns over customer lists have grown recently as ever-larger numbers of Internet companies have failed. Disney-aligned Toysmart provided the initial impetus for the concern as it attempted to sell its customer list after closing shop earlier this year. The proposed sale drew fire from both the FTC, which launched an investigation into the action, and 41 state attorneys general, who filed suit against the company to stop the sale.

The two auction companies are still reviewing the privacy implications of the sale, Lechner said. Meanwhile, anyone who does not want his or her information transferred to Dutchbid can opt out by informing the companies, he said. Gold's executives are attempting to contact customers via online message boards to alert them of the sale, Lechner said.

"The only thing we're going to do is do what the majority of people want done," he said. "We'll have to see what the community feels."

Despite the merger and regardless of how former Gold's members feel, Dutchbid faces the daunting task of competing with online auction heavyweight eBay, and with Amazon.com and Yahoo, which also have auctions. In contrast to Dutchbid, eBay has some 19 million registered members.

Launched in September, Dutchbid plans to compete against the big auction sites by offering personalized service. The privately funded company promises to personally answer email within an hour of it being sent and provides live customer support 20 hours a day.

"A lot of online auction users complain about the big three not providing personalized service," Rosenberg said. "There's one rule of Dutchbid.com: No form letters."