LookSmart to Buy WiseNut

In a bid to improve its results and better compete with rivals, paid listings search engine LookSmart said it plans to acquire privately-held rival WiseNut.

Through an all-stock deal, San Francisco-based LookSmart will offer about $9.25 million in stock for the smaller, seven-month-old firm. It is uncertain when the deal will close.

When it does, the purchase will not only have boosted LookSmart’s competitive position by eliminating a rival search engine, it also will provide the company with improved technology. Santa Clara, Calif.-based WiseNut’s search engine combines contextual analysis with link analysis — that is, the practice of considering the number of links to a page to determine how popular it is — to provide what several industry-watchers have called some of the space’s most targeted results.

Theoretically, that means improved search returns for LookSmart, which charges advertisers a fee to be listed in its search engine, and which syndicates the results to portals and Internet Service Providers with landing pages.

“As we integrate WiseNut’s search technology over the next few quarters, LookSmart will be able to offer our portal and ISP partners a full-service solution that includes a scalable billion document index infrastructure, next generation search relevance and strong listings revenue,” said LookSmart Chairman and Chief Executive Evan Thornley.

The move is calculated to boost LookSmart’s standing in the paid listings market, which is dominated by Overture, and which faces new competition in the form of recent entrant Google.

Search engine relevancy is of particular importance to LookSmart, since its model differs vastly from Overture, which ranks all of its paid listings based on the amount advertisers are willing to pay. LookSmart, meanwhile, charges a premium only for the top-three spots, but a flat fee for all other sites.

Google uses widely acclaimed engine technology similar to that of WiseNut for its search results. Like LookSmart and Overture, it sells keyword-based listings, but only as an adjunct to its unpaid search results.

By combining Google-style technology with its original paid listings business, LookSmart believes it can better compete with both rivals.

“By acquiring WiseNut, LookSmart becomes the first company to have both high-quality scalable search technology and strong listings revenue generation,” Thornley said. “We believe this will position us to compete with companies that have only one of these capabilities.”

The proposed acquisition comes as rivalries in the paid listings space are heating up. Google first began syndicating its keyword-based ads and charging on a cost-per-click basis — similarly to Overture and LookSmart — last month. Overture, meanwhile, is striking out into new territories in a bid to increase its advertiser base, launching a German-language site and planning international rollouts elsewhere.