A start-up headed by former MySpace.com chairman Richard Rosenblatt has bought domain registrar eNom, Inc., and is preparing a major push into domain-based advertising and commerce. Demand Media is backed by $120 million in funding from Wall Street investors and venture capital firms, and has been quietly acquiring a portfolio of more than 150,000 domains. Terms of the sale were not announced, as both firms are privately held.

The deal is likely to heighten investment interest in the domain name sector, which has been boosted by a trend trifecta - a surge in new domain registration, rising prices for resold domains and growing revenue from domain-based advertising.

eNom is the third-largest domain registrar with more than 6.4 million names under management. What is less widely known is that eNom is also the world's fifth-largest web hosting provider as measured by active sites - hostnames that contain content and thus are likely to be developed web sites generating hosting revenue each month. eNom hosts nearly 750,000 active sites, offering shared hosting plans priced at $7.80 a month.

The deal demonstrates that Wall Street and major corporation are watching the domain business closely in search of opportunities. "Media companies and advertising networks are now recognizing the central role a domain name plays in bringing users to Internet properties," said Paul Stahura, eNom founder and CEO, who will become president and COO of Demand Media.

Rosenblatt was previously CEO of Intermix Media, which last year sold MySpace.com to Rupert Murdoch's News Corp. for more than $650 million. He was also the founding investor and vice-chairman of Great Domains, as well as founder and CEO of iMALL, Inc, a publicly traded company which was sold to Excite@Home in 1999.

"There are interesting components of the domain industry that when properly put together can provide a very compelling platform for the next generation of media companies," said Rosenblatt. "Direct navigation traffic, combined with specific proprietary content and innovative marketing will unlock an entirely new realm of Internet media. We look forward to working closely with the domain industry as we build Demand Media into a global media enterprise."

That includes "selectively acquiring portfolios of premium domains that can be developed into niche media properties," the company said. Demand Media will focus much of its efforts on developing domains, adding relevant content rather than displaying a full page of contextual text ads, as is the common practice on domain parking services. To control costs, the company will rely on user-generated content, and has acquired eHow Inc., which creates niche content through how-to sites that receive millions of unique visitors per month.

"For eNom's valued network of resellers and retail customers, the acquisition represents no changes to existing relationships," assured Stahura. "We will continue to offer domain name and related services under the eNom brand, which is one of the strongest in the domain-name business. eNom's resellers can be confident that the company will continue to build and enhance its infrastructure, enabling eNom to offer an even more robust suite of services." eNom said the deal could offer "new online advertising opportunities for eNom's clients."