LookSmart Changes to Cost-Per-Click Listings

Pay — and keep paying — or don’t appear, LookSmart told existing and new listing customers last month, in a significant change to how the human-powered search engine lists Web pages from commercial Web sites.

LookSmart once allowed pages to be included in its commercial listings for a one-time review fee. That’s over, replaced in April by a new cost-per-click “LookListings Small Business” program.

The new program requires a mandatory, one-time review fee. At $49, it’s much less than the $149-$299 levied under the old programs. However, the new program charges listed pages a $0.15 fee for each click received.

LookSmart also has a $15 monthly minimum spend requirement. If a listing fails to generate $15 worth of click revenue in a given month, LookSmart bills that entire amount. If a Web page only gains 50 clicks in a month ($7.50 worth), for example, LookSmart charges the listing’s owner $15.

As a result, commercial LookSmart listings now cost a minimum $180 per year, not including the one-time review fee. That sounds less expensive than the $299 per year Yahoo charges. But Yahoo’s annual fee includes “all you can eat” clicks, whereas LookSmart’s is limited to 1,200 clicks.

Not Likely to Hurt Relevancy

The change raises questions as to how useful LookSmart’s directory will be, as did Yahoo’s shift to annual fees at the end of last year. Chances are, it won’t be a major problem. LookSmart will continue to list non-commercial content free, gathered through submissions to its Zeal service. The company said commercial pages deemed “absolutely essential” to relevancy will be retained, regardless of payment.

This means the impact will be in “oversubscribed” categories, where numerous businesses are represented. Web site hosting is one example. Hosting companies unwilling or unable to pay the new fees will eventually be removed from the directory. Ample hosting companies will remain listed, so consumer impact will be minimal.

LookSmart’s changes are a continuation of the trend begun in 2000, when payment for commercial listings became mandatory at Yahoo and LookSmart. Commercial listings became closer to the yellow pages model: Advertisers who don’t pay aren’t included.

Fees Made Retroactive

The real controversy in LookSmart’s new program is the decision to make the cost-per-click model retroactive. Tens of thousands who paid to be listed since the beginning of 2000 have been told to join the new program or risk being delisted, according to LookSmart.

As an incentive, LookSmart offered $300 in free clicks to everyone who made use of the old programs, regardless of the amount originally paid. The idea is no one will have “lost” money. They’re reimbursed what they originally paid, if not more.

Some aren’t soothed by this offer. They paid what they believed was a one-time fee to be included in the directory. Now, LookSmart is changing the rules to earn more for itself.

“My company paid LookSmart to be included in their directory years ago, and we were promised that we had to pay a one-time flat fee. It was understood that our listing would remain there permanently,” one reader wrote. “It seems like LookSmart is breaking its promise and forcing all its past customers to move to its new business model without our due consent. There are many LookSmart customers out there who are enraged with LookSmart’s unilateral move.”

Will LookSmart end up in court? Perhaps. Its defense is the terms and conditions of the old program allowed changes at any time, and the credit offer should smooth customer relations.

“We feel covered from a legal perspective, but, more importantly, from the customer perspective we feel we are making good,” said Jennifer Schindler, LookSmart’s director of product marketing.

Flexible Terms

Reading the original program agreements reveals LookSmart pretty much retained the right to do whatever it wanted. There’s no doubt those using the programs received exactly what was promised: a pledge by LookSmart to review their Web sites within a set period of time and provide a yes or no answer about inclusion. There’s probably a strong case that people using the program had a reasonable expectation to continue to be listed for a fee, rather than be moved into a new program requiring more fees.

Yahoo sidestepped controversy when it rolled out its annual fee program in December. A fee was required for new submissions, but old listings were exempted. Some griped it cost more for new sites to submit to Yahoo, but no one complained something unfair was imposed retroactively.

LookSmart would have been wiser had it followed Yahoo’s lead. Those with existing listings could have been told they’d be listed regardless, but by switching they could reap benefits, primarily click-through reporting and reduced costs to alter listings.

LookSmart claims it’s getting plenty of support and thousands are converting to the new program. Retroactive move complaints are from a small minority, the company says.

Carrot: Free Credits; Stick: Delisting Threat

What happens if you take up LookSmart’s offer? You get $300 worth of free clicks — but only $15 of them per month. You can remain listed in the directory for up to 20 months without charge — but only until you get 100 clicks in a given month. Once that quota’s reached, your listing isn’t available until you get new credits the following month or you decide to fund your account with your own cash.

Those who convert are spared a $150 deposit against future click charges and are allowed to use LookSmart’s listing update program at a discounted rate.

Peter Adams, LookSmart’s CTO said, “It’s unlikely that people are going to say… ‘I’m not going to take free clicks from you for 20 months.'”

Unlikely, but not impossible. Fail to take up LookSmart’s offer to convert, and you risk getting delisted permanently (though this may not actually happen). LookSmart says a site considered for delisting is reviewed by the editorial team. If deemed crucial to the directory’s breadth, it will be retained.

I Never Signed Up! What’s This Message?

People are fearful LookSmart is charging for clicks even if they haven’t joined the new program. Not true, but you might get that impression.

LookSmart has transitioned your site and deducts clicks from your “new” account. You may receive a notice saying your click “charges” have reached the “monthly budget level… you have set for your account,” and you need to increase your budget to have your site appear again.

Don’t panic. If you don’t log in to your account or if you log in but don’t change your budget to exceed the amount of free clicks you’re entitled to, you shouldn’t be charged anything.

Confusion could have been avoided with more careful language.

MSN’s Role

MSN Search occupies a unique position among LookSmart’s partners. LookSmart won’t quantify exactly how important MSN Search is, but the massively popular service clearly provides more reach and traffic than other distribution partners. MSN Search is the only major partner not rebranding LookSmart results.

MSN Search stands to gain revenue from the change but insists relevancy remains the most important factor.

“LookSmart’s a great partner of ours,” said John Krass, MSN Search’s director of business planning. “We look to them for a high quality directory. If we think they are doing the wrong thing, we’ll tell them.”

Non-Commercial Listings Unaffected

Non-commercial listings at LookSmart-owned Zeal are unaffected by the new model. Commercial sites providing non-commercial content can be listed through Zeal for free.

A small number of non-commercial sites used LookSmart’s paid submission programs before Zeal was established. LookSmart is trying to identify them and move them into Zeal. If you’re one of them, contact LookSmart to avoid having your listing deleted.

Is the Program Worth It?

Is LookListings Small Business a must-do option for small businesses newly submitting to search engines? Maybe. It’s worthwhile for most small businesses. But LookSmart is no longer the must it was in the past.

Paying LookSmart’s one-time submission fee was an easy decision. Value in traffic was returned over time for the vast majority. With new cost-per-click pricing, the decision is less straightforward.

If you want sheer traffic volume, LookSmart is attractive. Especially if you can make any visitor to your site pay off for $0.15 per click. Everyone needs to weigh this individually. Sites on a budget might forgo LookSmart, especially if they’re not making use of other cost-per-click programs.

Search Engine Marketers: Include your company on SEMList.com.