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LookSmart Cuts Staff But Gains Big Amazon Deal

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LookSmart cut its staff by nearly one-third last month, but this was due primarily to the continuing refocus at LookSmart on selling listings that are distributed to partners, rather than trying to sell advertising on its own site.

In fact, just after the layoffs, LookSmart announced its biggest "Subsite Listings" sale to date, to Amazon. The deal allows content from Amazon to be deeply categorized in the LookSmart directory. That means Amazon will likely appear in response to a wider range of queries, so its traffic from LookSmart partners such as MSN Search should increase.

In return, Amazon -- like other Subsite advertisers at LookSmart -- will pay LookSmart a per click fee. LookSmart did not release how much the Amazon deal is worth, only that it is the largest such deal to date. In its last three quarters, listing services have generated $10 million for LookSmart.

To see an Amazon link in action, try a search for "cable guy" at MSN Search, which uses LookSmart results. That should bring up a page within Amazon about The Cable Guy on sale in DVD format. This type of deep listing to content within a site typically would not be found within directory results, because editors would not have the time to index a site so thoroughly and, importantly, maintain those links in the long term. But, since LookSmart is paid by the click for its Subsite listings, such deep categorization is possible.

The recent layoffs did bring one search related loss -- an end to the LookSmart Live question answering service. However, one of LookSmart's acquisitions is starting to work for itself. Over 100,000 URLs from Zeal.com, the volunteer web directory that LookSmart bought last year, have now been included in LookSmart's listings, the company says.

Overall, it would be foolish to see the recent layoffs as a sign of LookSmart being on the ropes. Such thinking simply doesn't take into account the completely new paid inclusion business model that LookSmart is following, which should be successful, given that its search partners are looking for cash.

My favorite quote on LookSmart's prospects has come out of an earnings update by Merrill Lynch's Henry Blodget: "As expected, whacks guidance and 30 percent of employees. Still a real company, though (believe it or not), with plenty of cash. New bar set so low management ought to be able to get out of bed in morning and fall over it."

By the way, the new approach of a directory doing deep listings may produce something we've never needed before -- clustering of directory results.

Clustering, when applied to crawler-based results, means that only the very best page from a particular web site is displayed, in response to a search. Before the days of clustering, you might do a search only to find the top results were dominated with listings from one particular web site. Clustering, now used by virtually all major crawler-based search engines, eliminates this problem and produces more variety in the results.

Clustering has never been needed before for human-compiled listings, because it was unlikely that these results would have more than one or two listings for a particular web site. Now that LookSmart can afford to spend more time categorizing sites -- because it is paid by the click to do so -- these deeper listings can result in one site crowding out others.

For instance, a reader reported that a query for "nutritional therapy" at MSN Search, which uses LookSmart data, produced so many matches from the same site that she didn't feel her site could ever get found for that phrase.

As it turned out, 12 of the top 15 matches I looked at recently all led to different pages within the same web site. There were pages dealing with topics such as bladder infection and heart disease, but because they all included the words "nutritional therapy" in their descriptions, they came up tops for this search.

Obviously, that's not good for a site owner trying to be found for that phrase. More importantly, it's not good for a searcher looking for diversity in search results. To be fair, I haven't seen much of this happening at MSN Search or other LookSmart partners. It's just something that could happen more frequently, as deep categorization continues, unless clustering is introduced. For its part, MSN Search says its considering a fix to the problem.

"We are definitely taking a serious look at this for our next release, by doing things like limiting Subsite listings to three per results page," said Bill Bliss, general manager for MSN Search.

Also, when I first reported on LookSmart's Subsite listings back in November and listed the search engines involved, Excite responded that it wasn't part of the program and shouldn't be listed as a participating service. Given this, I pulled the reference to Excite from the article.

Fast-forward to last month, when LookSmart posted new information on its web site that does a much better job of explaining both its normal paid submission programs and the per click Subsites program that are available. Checking this out, I noticed that the new marketing materials for the Subsites program listed Excite as a partner -- odd, because as I have explained, Excite previously had told me they were not.

This was a mistake on LookSmart's part, and Excite has since been removed -- it still does not participate in the program. Despite this, Excite has been receiving Subsite listings in its feeds from LookSmart. These don't include tracking codes that let LookSmart do billing and share revenues with its partners, so Excite has been making no money from them. Nevertheless, as LookSmart still receives an up front fee for Subsite listings, LookSmart still benefits to have them carried by partners even without tracking codes.

It is not yet clear how this will be resolved. Excite seems to want a feed free of any Subsite listings, unless it becomes a partner. LookSmart seems to indicate that as long as their are no tracking codes, carrying the Subsite listings shouldn't be a problem. I'll keep you informed on the resolution.

Remember, this applies only to the special Subsite listing. There is no problem with Excite carrying LookSmart's more regular listing. It is a full partner there.

LookSmart
http://www.looksmart.com/

LookSmart inks directory deal with Amazon
News.com, Jan. 17, 2001
http://news.cnet.com/news/0-1005-200-4510989.html

More details on the Amazon deal.

LookSmart Looking Up
InternetNews.com, Jan. 17, 2001
http://www.internetnews.com/IAR/article/0,,12_562131,00.html

Details on the Amazon deal and revenues at LookSmart in general.

LookSmart Pains On 4Q Revision
SiliconValley.Internet.com, Jan. 11, 2001
http://siliconvalley.internet.com/news/article/0,2198,3531_558671,00.html

LookSmart is cutting its staff by a third, due to dropping ad revenues, and it is consolidating operations to focus more tightly around a different type of "ad" product -- selling listings within its directory.

LookSmart Submit Page
http://submit.looksmart.com/

Updated materials that outline LookSmart's various listing programs.

Pay For Placement
http://searchenginewatch.com/resources/paid-listings.html

Past articles about LookSmart's Subsite program can be found in the paid inclusion section of this page.

Search Assistance Features
http://searchenginewatch.com/facts/assistance.html

More about clustering can be found here.


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