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Gay start-ups may form alliance and PlanetOut are on the verge of merging or forging an alliance, according to sources close to the companies. and PlanetOut are on the verge of merging or forging an alliance, according to sources close to the companies.

Discussions between the competing, privately held start-ups, both based in San Francisco, began in September and are nearing completion, sources said.

The two sites lead the pack of affinity portal sites catering to lesbians and gays. Each has garnered tens of millions of dollars from investors placing their bets on the potentially lucrative gay and lesbian online advertising market.

PlanetOut executives declined to comment. executives could not be reached for comment.

But sources familiar with the negotiations confirmed that the companies are focusing on two potential alliances. One would merge the companies in a roughly equal merger. The other would create a strategic alliance whereby the companies would share content and technology. is the primary holding of Online Partners, which merged and in March 1999 to form the 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

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. Baroda Ventures' David Bohnett, who founded GeoCities and oversaw its sale to Yahoo, is chairman of the board.

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 site Out & About., by contrast, is known for its community applications, including chat and personals ad profiles.