LookSmart Introduces its Customers to Keywords

Facing a dire situation as the expiration of its paid inclusion contract with MSN approaches, paid search player LookSmart will begin distributing its paid inclusion customers’ listings through its bid-for-placement distribution network.

The company has combined both products into one, called LookListings, which encompasses both LookSmart’s traditional strength, paid inclusion, and its newly launched bid-for-placement product. Both will be manageable through a single interface.

Existing customers are automatically opted-in for the bid-for-placement product as part of the shift. Clicks will initially be billed at the same per-click rate advertisers pay for paid inclusion. LookSmart will, by default, place the ads under the keywords advertisers entered when they created their paid inclusion listings, though customers can make changes. Advertisers may also up their bids if they’d like better placement on the bid-for-placement network, or they may choose to opt-out.

“For LookSmart, it instantly catapults us into a stronger position in the $2 billion per year sponsored search market,” said CEO Jason Kellerman.

LookSmart’s bid-for-placement network includes sites like SearchFeed, myGeek, ABCSearch, CNET, Road Runner, InfoSpace, LookSmart.com, Cox Internet, Mamma.com and Alltel.

The move is clearly motivated by LookSmart’s desire to widen the distribution network for its advertisers’ listings as it prepares to lose its MSN contract in mid-January. LookSmart announced in October it would lose MSN as a partner. The Microsoft-owned portal is building its own search technology in-house. LookSmart last week acknowledged in a Securities and Exchange Commission filing it would lay off half its staff to cut costs due to the expected revenue loss. More layoffs may be in store for 2004.

This isn’t the first time LookSmart advertisers have seen the rules changed mid-stream. In May of last year, the company told marketers who had paid a flat fee to be included in its directory it would begin to charge by the click. This current change seems unlikely to create nearly as much ill will. Advertisers still pay the same amount per-click.

The industry may see more paid-inclusion/paid listings combinations, as brought together by LookSmart. Yahoo has the same combination under its belt since its acquisitions of Inktomi and Overture.

“I would not be surprised to see Yahoo/Overture intermingling the paid placement and paid inclusion databases in the future as well,” said Kevin Lee, CEO of search engine marketing firm Did-It.com. “After all, marketers have voiced their desire for traffic in both cases, and even assigned a fixed or variable CPC to the traffic.”