Tucows Sells Two Former Infonautics Services
Paula J. Hane
Posted On August 26, 2002
Tucows, Inc. (http://www.tucows.com), an Internet services provider and domain registrar, announced that it has sold eLibrary and Encyclopedia.com, its search and reference services properties, to Alacritude, LLC, a new Chicago-based company. Tucows had just acquired the properties in a merger with Infonautics, Inc. in August 2001. Actually, because Tucows, Inc. became a wholly owned subsidiary of Infonautics, and Infonautics changed its name to Tucows, Inc., some might have missed the fact that Tucows was even the owner of the two information resources.
According to the announcement, under the terms of the sale, Alacritude has acquired all of the assets and has assumed certain liabilities associated with the eLibrary and Encyclopedia.com services. The proceeds of the sale are approximately $1.5 million.
eLibrary is a subscription-based general reference service that lets users ask questions and receive answers from an aggregated archive of a diverse range of sources, including newspapers, magazines, books, television and radio transcripts, maps, and photographs. Potential individual subscribers were given a free trial period, after which Tucows typically charged a fee of approximately $15 per month for monthly subscriptions and approximately $80 per year for annual subscriptions, both for virtually unlimited usage.
Encyclopedia.com is a free encyclopedia site that provides more than 57,000 "frequently updated articles" from the Columbia Encyclopedia, seventh edition (published by Columbia University Press and last updated in April). Each article is also enhanced with links to newspaper and magazine articles as well as pictures and maps—provided by eLibrary, of course—with the obvious goal of signing up new subscribers to the fee-based service. (Users can sign up for a free 7-day trial to read the articles.)
Launched in 1993 as a software download site, Tucows still provides free downloadable software—more than 30,000 titles offered by local sites around the world. (In case you're wondering, the name Tucows is an acronym for The Ultimate Collection of Winsock Software.) The company also now offers outsourced domain name registrations through its network of more than 5,000 resellers in more than 100 countries. Tucows clearly generates the majority of its net revenues from its domain name registration services, while the reference services just haven't proven to be very profitable assets.
The company's 10-Q, filed on August 13, 2002, states: "The Infonautics business, which consists primarily of the Electric Library subscription service, which was acquired on August 28, 2001, contributed revenue of approximately $1.0 and $2.2 million for the three and six months ended June 30, 2002, respectively. As a result of seasonality and the continued difficult direct marketing environment, Tucows' subscriber base for its Electric Library end-user services continued to fall and dropped to approximately 47,000 at June 30, 2002, from approximately 51,000 at March 31, 2002."
So, the sale of the declining reference services business enables Tucows to narrow its focus and concentrate its resources. "These businesses were not core to our ongoing strategy, thus the sale will allow us to devote all of our resources to our Internet services business where we believe our major opportunities lie," said Graham Morris, Tucows' chief operating officer.
Morris said that Tucows is retaining the customizable search technology that it acquired from Infonautics and would be evaluating how it could be applied within the company's businesses. This formed the core technology behind the former CompanySleuth and SportSleuth products from Infonautics. Morris also said that Tucows was keeping NewsDirectory.com since it complemented its NewsHub product. The company will evaluate and decide what to do with them.
So what was the attraction of this purchase for Alacritude and who is behind this new company? "Acquiring eLibrary and Encyclopedia.com is an important strategic step for Alacritude," said Patrick Spain, Alacritude's chairman and CEO. "Our primary interest in these properties is to acquire a platform on which to develop and deliver to individuals the next generation of technology-based online research tools."
Spain was the chair and co-founder of Hoover's, Inc. and currently serves as a director on Hoover's board. Alacritude, which is owned by a Chicago-based group of investors, will maintain the online services' current operations in the former Infonautics office in King of Prussia, Pennsylvania, and will retain all of Tucows' staff currently employed there. According to Spain, Alacritude's headquarters are in Chicago and the company will operate in multiple locations.
Tucows held an 11-percent interest in bigchalk.com, Inc., a privately owned company that had been the sole provider of content, hardware, software, and related costs to deliver the Electric Library (eLibrary) subscriptions. Tucows paid content royalties and technical service fees to bigchalk. According to the 10-Q filing, "The license is royalty free and perpetual, but bigchalk.com has a right to terminate the license on a change of control of Tucows." Tucows also depended on bigchalk.com to provide technical and data center support as well as services for Electric Library. This agreement was due to expire on December 15, 2002.
The Tucows 10-Q stated: "During the quarter ended June 30, 2002, the Company reviewed the carrying value of its investment in bigchalk. Based on this review, Tucows believes that a permanent decline in the value of this investment has occurred and has recorded a write down in the amount of $1,013,335 against the carrying value of this investment. The carrying value of this investment at June 30, 2002 was nil."
bigchalk was founded in December 1999 when several education companies—Infonautics, ProQuest Information and Learning, MediaSeek Technologies, and HomeworkCentral.com—formed a partnership and merged their K-12 resources, which included Infonautics' Electric Library.
According to Spain, Alacritude did not acquire any interest in bigchalk when it purchased the reference properties but it has worked out appropriate arrangements with bigchalk. He didn't share any details. At this point, the Alacritude Web site (http://www.alacritude.com) merely has a Flash presentation showing "Alacrity + Attitude = Alacritude," and an e-mail address: firstname.lastname@example.org. Spain said that the company would be announcing its plans in the next few weeks.