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geosign-logo.gif One of the quietest but apparently most successful producers in the local search space has been GeoSign, owned by webpreneur Tim Nye. The Canadian company has incubated TrueLocal, which aggregates local online databases, and is also invested in mobile directory player Go2, among other geospatially savvy companies.

But most of its fortune, apparently, has been made from arbitrage: basically, collecting micro segment URLs for spammy blogs, or splogs (i.e., “”), buying cheap placement on Google, and filling the ads with more expensive Yahoo! ads.

Last year, the publicity-shy company broke its silence when it announced $160 million in venture funding from Bethesda-based American Capital. Since then, however, Google put a hole in the business model by cracking down on such practices. And now GeoSign is evidently being split up, per and Ann Brocklehurst’s blog (which we saw via PaidContent).

The article says GeoSign has laid off “a big chunk” of its 230-person workforce and split the company into two parts: eMedia Interactive, which will own the domain names; and Moxy Media, which is being positioned as a lead generator and will be given to American Capital. American Capital is also getting a “substantial” chunk of its cash back in the settlement.

The downsizing of GeoSign’s ambitions — not confirmed by us — might seem like it would also affect other geodomain-heavy companies, such as Marchex. But Marchex is an entirely different kind of company, says Matthew Berk, Marchex’s lead search architect.

“On the traffic side, we’re seeing continued success in having our sites indexed by G[oogle] and others, based largely on the deep relevance of the content on the sites,” says Berk, via e-mail. “The prime directive across our network is to provide rich, compelling, locally relevant content, and an ever-improving user experience.”

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