LookSmart Searches for Vertical Comeback

Search player LookSmart has taken a significant step forward on what it expects to be its comeback trail, launching 161 new vertical search sites.

The move came as the company announced a third quarter net loss of $4.3 million, which was better than the $5.5 to $6.5 million loss it expected when it last reported earnings. Revenues for the quarter were $9.2 million, higher than the $7 million to $8 million it had predicted but lower than the $10.2 million in brought in last quarter.

LookSmart has been fighting for its life since losing MSN as a distribution partner back in 2003. Since that time, when its main products were paid inclusion listings, the company has made cutbacks, shaken up its management and refocused around three initiatives — a paid search and contextual ad network, vertical search sites, and technology licensing.

“We’ve gone from a company that everyone had all but written off, to a company where no one is saying our success is assured — including ourselves mind you — but they’re saying that maybe we can build an audience,” CEO Dave Hills told ClickZ News.

The company unveiled a large piece of its vertical search strategy Thursday, launching 161 vertical search sites in 12 categories including automotive, cities, food, health, home, sports and travel. It had previously built 20 vertical sites in the education and money categories as part of the same effort. The model of a vast array of topic-specific sites is similar to what Hills oversaw when he was COO and president of sales at About, but, in the LookSmart case, the content is brought together technologically rather than by human editors.

“We decided if we could do this on a highly automated basis, we thought it would be a very good business,” said Hills.

The development of the vertical search sites also allows LookSmart to offer different inventory — graphic banner ads — to advertisers. It’s offering a 728 x 90 leaderboard, a 160 x 600 wide skyscraper, and a 300 x 250 rectangle at launch. These ads will be sold through LookSmart’s sales force, rather than through its automated interface.

In the paid listings area, LookSmart continues to deal with the aftermath of an effort to improve the quality of its distribution. Total paid clicks for the quarter came in at 71 million, as compared to 80 million last quarter. Average revenue per click was $0.15, which was the same as the previous quarter. Traffic acquisition costs increased slightly to 53 percent of advertising revenue, as compared to 51 percent last quarter.

In an effort to boost options for advertisers, the company this week launched broad and smart match options for paid listings. In broad match, advertisers can have ads appear for all queries that contain selected keywords. Smart match lets ads be shown when the match between query and keyword isn’t exact, such as in the case of misspellings or plurals.

Technology licensing is a new business for LookSmart, but it managed to ink two well-known clients in the third quarter. Ask Jeeves is using the company’s self-service ad sales platform, while the New York Times Company is using LooksSmart’s Furl technology within its Times Select product to let users save and share content.

LookSmart says it expects to report similar net loss numbers for the fourth quarter, though it predicts revenues will increase 5 to 6 percent in the quarter. But traffic acquisition costs will also rise, to somewhere between 57 percent and 60 percent.

As it reported its earnings, LookSmart announced it had hired a new CFO. John Simonelli, the former CFO of Gap Direct, joins the company, replacing Bill Lonergan, who had earlier said he would leave November 1.

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