By: Karim Mostafa

Online Community, Commerce Services Combined

by Karim Mostafa

Community and commerce have been two of the biggest buzzwords for
newspaper Web sites.

Now, two of the more popular service providers in these areas are
joining forces, creating a new network that reaches over 600 media

KOZ.com, an online community builder, and Internet Tradeline Inc.
(ITI), provider of the Point & Shop online malls, announced Monday
that they are merging to create an application that combines their
technologies. Terms of the deal were not disclosed.

The new company, to be called KOZ.com and headquartered in Research
Triangle, N.C., received a $16.2 million investment from a group of
investors including CMGI@Ventures, Media General, BancBoston Ventures,
Barnard & Co., Donrey Media, Southeast Interactive Technology Funds,
and Tribune Ventures.

KOZ.com, until now, provided community-building tools to media Web
sites through its Community Publishing System. KOZ.com provided some
e-commerce functions to its affiliates through third-party Orbit
Commerce, creating a revenue share split between three parties. Among
KOZ.com’s many clients are KnightRidder.com and Tribune Interactive.

Meanwhile, ITI signed up major newspaper companies, such as New York
Times Digital and Advance Internet, for its Point & Shop network. ITI
helps newspapers set up online malls for local advertisers.

By the end of 1998, the company had signed up over 100 newspapers for
its program. Since then, there have been complaints from affiliates
about the lag time in getting sites running. A recent defector was ANG
Newspapers in California, which switched its online shops to another
company, NewsLinQ.com. In response to the complaints, ITI took on the
responsibility of directly collecting content for shopping sites from
local advertisers, instead of relying on newspaper advertising reps to
do it.

Peter Zollman, founding principal of the consulting firm Advanced
Interactive Media Group, said, “Tradeline has an extremely effective
back-end solution, but the cost of operations has far exceeded their
generated revenue.” Zollman said Tradeline was running out of money
and that an investor recently pulled a $20 million emergency influx of

ITI’s CEO and the new CEO of the merged KOZ.com, Linda McCutcheon,
admitted money has been a problem. “Raising money is a usual problem
for private companies,” she said. “In this case, I would say raising
money for ITI was an acute problem, not chronic.”

Whether or not ITI was downsizing, consolidation in many ways makes
sense, Zollman said. “They have complimentary product offerings and
they have similar clients.”

Michael E. Moran, president and COO of the newly formed KOZ.com, said
that Media General only invested once it heard of the proposed merger.
The merger discussions went on for eight to 10 weeks before a formal
agreement was reached.

Moran says that merging with ITI allows the company to keep a higher
percentage from transactions and monthly fees, now that commerce can
be handled in-house.

Both Moran and McCutcheon stressed that the new network increases
advertising capabilities considerably. McCutcheon said, “We expect to
be quite aggressive in both local and national advertising.”

Moran said KOZ’s advertising people may be moved up to the New York
office, where McCutcheon will continue to be based.

As a result of the merger, ichat – KOZ’s online discussion tool – will
be spun off as its own company. Moran will be president and CEO of
ichat, which he said has already been profitable for some time now.
Ichat, more of a software licensing model, provides chat rooms and
message boards to more than 2,200 Web sites including The Wall Street
Journal Interactive Edition and some Gannett Co. Inc. sites.

For now, newspaper Web sites using either KOZ.com or Internet Tradeline
shouldn’t expect any immediate changes. Company officials could not say
when the companies would be completely integrated.


Karim Mostafa (kmostafa@editorandpublisher.com) is associate editor for
E&P Online.

(c) Copyright 2000, Editor & Publisher

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