FindWhat Acquires Comet Systems

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Search marketing firm FindWhat.com is getting into the desktop software business, having agreed to acquire Comet Systems for up to $33.5 million.

Comet Systems was best known during the late '90s as the developer and distributor of the Comet Cursor, a software system that let Internet users, or publishers, choose their cursor image. Later, it developed a search toolbar, through which it delivers algorithmic results and Overture paid listings. It also offers travel search and privacy-oriented software, such as a pop-up blocker.

"We believe the desktop represents a rapidly growing opportunity for paid listings and targeted contextual advertising," said Craig Pisaris-Henderson, chairman and chief executive of Ft. Myers, Fla.-based FindWhat.

New York-based Comet says it has had "more than 100 million" software downloads, but doesn't specify whether any were uninstalled or how many active users it has. FindWhat didn't comment on the issue other than to say the software was on "millions of PCs," but said it would use its own search listings to help boost distribution of the software. Currently, it's distributed on popular download sites.

The move will help FindWhat expand the distribution of its paid search listings, which will supplant the Overture results. It also takes FindWhat along a path treaded by desktop software players like Claria, and WhenU. The advantage of such a system is that it allows the company to see users' behavior, including what they search for, and deliver advertising based upon their apparent needs.

"Our strategy is to find great ways to find what the users are looking for and find out what they need," said David Rae, chief strategy officer for FindWhat.com.

Desktop software makers have often been accused of being "spyware" that tracks users' every move, and even Comet has been under suspicion in the past. But FindWhat execs say Comet adheres to a strict privacy policy and had no personally identifiable information about its users.

"The user is unknown to us," said Rae. "We can tell what they search for and, for some of their searches, what the context of their searches were."

It's that data about searches that FindWhat.com is especially excited about.

"What they search for is interesting, whether it's travel or computers or whatever category," Rae said. "Another interesting thing for us is related search. If you search for Ford Mustangs, what else are you searching for?"

In fact, the company has discovered that people searching for cars often search for second mortgages, apparently because they are using the mortgage money to finance the car purchase.

The acquisition agreement calls for FindWhat to pay $8.5 million in cash plus $15 million in FindWhat common stock, and up to an additional $10 million based on Comet's performance over the next two years. Comet generated $8.5 million in revenue in 2003, suffering a net loss of $300,000, partly due to one-time charges related to vacated office space.