Last March, Guelph-based Geosign was on top of the online publishing world when it secured $160 million in private financing from American Capital. With category-killer domain names like Hockey.com and GolfCourses.com and the coffers full, Geosign’s future looked promising. Within six months, Geosign laid off a significant part of its 230 person workforce and industry pundits like TheStreet.com suggested that Geosign’s Google arbitrage strategy had gone sideways when the search engine tweaked its algorithm.
This arbitrage process involves buying cheap Google Adwords that are tied to common search terms in order to drive visitors to a website that includes additional ads. The site owner is betting the visitor directed to his site from the Google ad will click on the additional ads that he sold to other parties for a higher price.
Yesterday paidContent.org reported that Geosign is now returning a portion of the $160 million back to American Capital and that the company has been reorganized into two companies. Probably not the liquidity event American Capital was banking on.