Don’t mess with Google!

The Geosign-Google saga made the front cover of March’s Financial Post Business magazine and is worth a read. It chronicles the downfall of Geosign, it’s founder Tim Nye and their questionable Google keyword arbitrage business model.

Last March Geosign landed the largest-ever venture capital investment for a Canadian tech company only to lay off over 50 staff a couple months later. This was the beginning of the end that eventually saw $160 Million investor American Capital pull the plug on Geosign in January.

The Financial Post’s Robert Thompson summarizes the saga well in his piece titled Blown Away but a couple of his comments make me wish he had dug a little deeper:

And while the national business media has, until now, overlooked the story – surprising, given the size of the investment and the fact that Google played a direct role in the outcome – within Canada’s technology and venture-capital communities, the $160-million investment is known as the deal “that didn’t go well.”

Domain Industry pundits and bloggers began questioning this $160 Million investment the day it was announced at the TRAFFIC conference in Las Vegas last March. Geosign (and others) had been utilizing keyword arbitrage via Google for years and industry insiders were shocked that a VC would invest in a business built entirely on a strategy that hinges on Google.

As for Nye? He came away from the breakup with what one former executive describes as “assets with little value” – a few domain names, such as hockey.com and golfcourses.com, a few staff and little else. He created a new company called eMedia Interactive Inc., where he is listed as chairman.

Assets with little value???  Hockey.com & GolfCourses.com. These domains are worth multi-millions each in today’s domain name aftermarket.