LookSmart’s First Quarter Expectations Rise

Paid search listings provider LookSmart raised its financial guidance for first quarter revenue, with cost reductions and rapid growth in its listings business adding up to a more positive outlook for the beleaguered company.

LookSmart raised its guidance to between $21 million to $23 million, up from the range of $16 million to $18 million it had previously expected.

Adjusted net loss is expected to narrow to $10 million to $12 million including restructuring charges of approximately $4 million to $5 million. This compares to prior adjusted net loss forecasts for the first quarter of $12 million to $14 million, including restructuring charges of approximately $5 million to $6 million.

In early February, the company reported revenue and net income in excess of analysts’ predictions, but predicted a net loss for 2004 at the low end of analysts’ expectations.

The company attributed the improved outlook to its growing LookListings business and cost reductions. The company has reduced its staff from around 400 employees to around 200, following through with plans the company noted in an SEC filing in December. LookSmart said positive trends included rapid signing of new distribution partners to its sponsored search network in December and January.

The moves fit into LookSmart’s strategy of de-emphasizing its traditional strength, in paid inclusion, and focusing on its newest product, paid listings.

“We will continue to provide it [paid inclusion] forever, but in truth it becomes not as interesting for advertisers when the scale gets smaller,” Dakota Sullivan, the company’s vice president of marketing, told ClickZ news earlier this month.

LookSmart adds four or five new partners a month, according to Sullivan. The company is continuing to pursue smaller publishers with quality traffic as distribution partners for its LookListings.

“Keywords are now getting too expensive on the larger engines. On the so-called second-tier people tend to associate cheaper with lower quality. LookSmart wants that middle ground — we want to deliver high quality, high-performance sponsored search,” Sullivan said.

In another positive move, LookSmart recently signed an agreement with Microsoft to continue providing LookSmart search results to MSN for periodic use at its discretion. The company has been reeling since that portal opted not to renew its contract with LookSmart in October 2003. Still, MSN’s discretionary and periodic use of listings might not be

“We are focusing on what’s most critical, but even adding staff around business intelligence and customer service,” Sullivan noted.

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