What future for LookSmart?

Introduction

Search engines are key elements to generate traffic and get people know your website. The search engines arena is comprised from search engine technology providers, and destination web sites. The search engine technology providers' goal is to provide result to the destination web sites. LookSmart, as one of the main search providers, has left bitter-sweet impression, and today, its future is uncertain. Let's analyze LookSmart's current situation and see whether we should rely and work with LookSmart.

What is LookSmart?

LookSmart, founded in Australia in 1995 and now based in San Francisco , is a human-compiled directory of websites. Even if it operates its own website, it is not intended to the public use. The strategy of LookSmart is to provide services like Internet search solutions and paid search inclusion to other search engines.

LookSmart offers different services. First, it is a PPC provider . LookSmart had an original pay-per-click approach, very different from its main competitors. There was no bid: all participants paid the exact same amount per click. Moreover, they had to pay a non-refundable fee and a deposit.

Ranking depends on the relevancy of the keywords written in the title and in the description. Therefore, choosing LookSmart does not guaranty a high ranking.

It is also a directory through LookSmart-owned zeal.com. Zeal is an increasingly important part of the LookSmart Network. LookSmart gathers its listings in two ways:

- Commercial sites pay to be listed in its commercial categories,

- Noncommercial and not-for-profit get free listings through volunteer editors at the
Zeal directory.

Though Zeal is a separate web site, its listings are integrated into LookSmart's results

To complete its range of services, LookSmart bought in April 2002 WiseNut. It is a crawler-based search engine that is supposed to feature good relevancy. WiseNut has indeed a large database, but needs to be regularly updated.

LookSmart's main partners used to be Inktomi as a content provider, and MSN Search as the main destination web site. A few changes have occurred for a couple of months though. Thus, although LookSmart seemed to have a full range of services in the search engine field, its future seems increasingly cloudy.

How did LookSmart arrive to this kind of situation?

LookSmart never had a consistent price policy. LookSmart lost a lot of his market share from the small business after his controversial change of fees policy. First, LookSmart increased the one-time payment from $199 to $299. Then it moved to pay-per-click and required small business customers to pay ongoing, pay-per-click fees, rather than a one-time fee.

Moreover, although LookSmart was on MSN.com, one of the biggest search engines, it has a reputation of delivering very low conversion rates, that is to say the part of visitors that actually buy the product, and, as a consequence, providing a low return on investment for its customers.

In this environment, LookSmart lost part of its credibility. It is essentially due to its poor relevancy of results and its high level of customer dissatisfaction.

Besides, for the last couple of months, the landscape of search engines has changed, influenced by a wave of mergers and acquisitions. In this battle, however, LookSmart seems to have been put apart.

In particular, MSN's strategy to drop LookSmart and develop its own search engine and pay-per-click offer had a huge impact on LookSmart. In fact, its partnership with Microsoft business represented around 2/3 of its revenue. Therefore, LookSmart lost a key partner and started closing offices and firing people; its credibility and its financial health are suffering a lot from this loss, making it difficult to adapt its activity.

Can LookSmart overcome the situation?

LookSmart announced on his website that it is going to close LookSmarts.co.uk. It is due to the end of the partnership with MSN. This may be the end of LookSmart presence in Europe . It has also ended the Australian chapter of its existence after having sold its local assets.

LookSmart claims that it still has assets and new tools to implement, more particularly in the American market. It announced last October that it has now a network of partners that includes CNET, Road Runner, InfoSpace, LookSmart.com, Cox Internet, Mamma.com and Alltel.

It has decided to follow a new strategy of bid-for-placement search marketing that could represent an expanded revenue opportunity for LookSmart. The aim is to grow the portfolio of products it offers to its partners. Its intention is also to develop WiseNut using it more efficiently and promoting it as the "next generation search technology".

Conclusion

Will all these efforts be enough? LookSmart had a great potential that it didn't use as much as it should have. Its partnership with one of biggest actors of the search engine market led it to a situation of dependence. It will be hard now to compensate MSN's loss and will probably not be strong enough to be a key partner for the future. If LookSmart survives, it will be competing with second level players, as the major search engine and portals have chosen to work with other players: MSN – develop its own technology, Google – has its own technology and Yahoo! bought Overture as a PPC & Inktomi for the organic search solution.