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LookSmart Changes To Cost-Per-Click Listings

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Pay -- and keep paying -- or don't appear, LookSmart told existing and new listing customers last month, in a significant change to how the human-powered search engine lists web pages from commercial web sites.

LookSmart previously allowed web pages to be included in its commercial listings by paying a one-time review fee, through its "Basic Submit" and "Express Submit" submission programs. These have now been eliminated, replaced in April by a new cost-per-click "LookListings Small Business" program.

The new program still forces submitters to pay a mandatory, one-time review fee, though at US $49, this is much less than the $149 or $299 charges levied under the old programs. However, the new program also charges web pages that are listed a flat $0.15 fee for each click they receive.

In addition, LookSmart has a $15 per month minimum spend requirement. This means that if a listing fails to generate $15 worth of click revenue for LookSmart in a particular month, the company will still bill for that entire amount. For example, if a web page only gained 50 clicks in a month -- $7.50 worth -- LookSmart would still charge the listing's owner a full $15.

As a result, commercial listings with LookSmart will now cost at minimum $180 per year, not including the one-time review fee. That sounds less expensive than the $299 per year that Yahoo charges for its commercial listings. However, Yahoo does not have a cost-per-click component. Yahoo's annual fee provides "all you can eat" clicks, to whereas LookSmart's $180 minimum cost per year is limited to 1,200 clicks, for that time period. If you want more traffic beyond this, you need to pay beyond the minimum.

Not Likely To Hurt Relevancy

LookSmart's change raises issues as to how useful its directory will be for searchers, just as did the Yahoo shift to annual fees at the very end of last year. Chances are, this won't be a major problem. Notably, LookSmart will continue to list non-commercial content for free, which it gathers through submissions to its Zeal.com service. In addition, the company said any commercial web pages deemed "absolutely essential" to relevancy will be retained, regardless of payment.

This means that the biggest impact will probably be in "oversubscribed" categories, where there are many different businesses represented. Web site hosting is one good example of this. Companies offering hosting that cannot afford the new ongoing LookSmart fees or refuse to pay them will likely be removed from the directory, eventually. However, there will still be ample web site hosting companies that remain listed, so the consumer impact is likely minimal.

Overall, the change at LookSmart is a continuation of the trend begun in 2000, when payment for commercial listings became mandatory at both Yahoo and LookSmart. That made the commercial listings at both places closer to the Yellow Pages model, where advertisers who don't pay don't get included.

Fees Made Retroactive

The real controversy in LookSmart's new program is the company's decision to make the cost-per-click model retroactive to existing listings. Tens of thousands of people who paid to be listed through the old programs since the beginning of 2000 have now been told they must transition into the new program or risk being delisted, according to LookSmart.

As an incentive, LookSmart has offered $300 in free clicks to everyone who made use of the old programs, regardless of the amount they originally paid. The idea is that no one will have "lost" any money, because they are being given back what they paid originally, if not more.

Some -- if not many -- have not been soothed by this offer. They paid what they believed was a one-time fee to be included in the directory, and now LookSmart is essentially changing the rules on them, in order to earn more money for itself.

"My company paid LookSmart to be included in their directory years ago, and we were promised that we had to pay a one-time flat fee. Once it was accepted, it was understood that our listing would remain there permanently," one reader wrote me. "It seems like LookSmart is breaking its promise and forcing all its past customers to move to its new business model without our due consent. I am sure there are many LookSmart customers out there who are enraged with LookSmart's unilateral move."

LookSmart's retroactive decision reminds me of a recent story where a woman had won lifetime flights on a low-cost European airline. The airline later decided to limit her flights. As you might expect, the woman was unhappy -- so unhappy that she's taken the carrier to court.

Could the same happen with LookSmart? Perhaps. LookSmart's defense is that its terms and conditions under the old program allowed it to change the program at any time, and that its credit offer should smooth customer relations.

"We feel covered from a legal perspective but more importantly from the customer perspective, we feel we are making good," said Jennifer Schindler, LookSmart's director of product marketing.

Flexible Terms

Let's take a look at those terms. Here's a key section of LookSmart's agreement with customers for "Express Submit" back in February 2000, just after the program debuted:

"LookSmart reserves the right in its sole discretion to determine the sites selected for inclusion in the Directory and to change, modify, add or delete any or all of this Agreement at any time....if Applicant's site is accepted for inclusion in the Directory, LookSmart reserves the right in its sole discretion to determine Applicant's listing's title, review, and categorization and LookSmart editors retain control over the content and wording of all site reviews. LookSmart also reserves the right, in its sole discretion, to remove your site from the Directory, move the listing to a different category or subcategory, and change or remove any keywords, comments or annotations at any time, for any reason."

Pretty much, LookSmart kept the right to do whatever it wanted. There's no doubt that those using the submit programs received exactly what was explicitly promised, which was a promise by LookSmart to review their web site within a set period of time and provide a yes or no answer about whether is would be included. However, there's probably a strong case that people using the program had a reasonable expectation to continue to be listed for their fee, not to be moved into a new program causing them to pay yet more inclusion fees.

Yahoo neatly sidestepped such controversy when it rolled out an annual fee at the end of last December. An annual fee was required for all new submissions, but old listings were exempted from the change. While people may have griped that it cost more for new sites to submit to Yahoo, no one could complain that something unfair was imposed on them retroactively.

LookSmart would have been far wiser -- and enjoyed much more support -- had it followed Yahoo's lead. It could have told those with existing listings that they'd continue to be listed regardless of the new program, but by switching over to the new program, they could have some of the benefits it offers, primarily that of clickthrough reporting and cheaper costs to alter listings.

For its part, LookSmart says it is getting plenty support, that thousands of people are converting to the new program and new sign-ups are also happening. Complaints about the retroactive move on forums and elsewhere are from a small minority, the company says.

"We are seeing this incredibly vocal group of people out there who are taking issue with how the transition is happening, but behind the scenes, we are seeing sales volume that is exceeding our expectations," said Dakota Sullivan, LookSmart's vice president of marketing. "The silent majority is transitioning just fine."

Carrot: Free Credits; Stick: Delisting Threat

What happens if you take up the LookSmart offer? As said, you'll get $300 worth of free clicks -- but you only get $15 of them per month. That means you can remain listed in the directory for up to 20 months, without charge -- but it also means this will only happen until you get 100 clicks in a particular month. Once that quota is used up, your listing will cease to be available until you get new credits in the following month or unless you decide to fund your account with your own cash.

In addition, those choosing to convert are spared from having to pay the $150 deposit against future click charges and are given a coupon so they can use the LookSmart listing update program at a discounted rate.

"There's really no risk for them to participate," said Peter Adams, LookSmart's chief technology officer. "It's unlikely that people are going to say that I'm not going to take free clicks from you for 20 months."

Unlikely, but not impossible. So what happens if you refuse LookSmart's offer? It's being extended to people until mid-July. Those failing to take it up risk getting delisted permanently, though this may not actually happen. LookSmart says that any site being considered for delisting is reviewed by their editorial team. If it is deemed crucial to the directory breadth, it will be retained.

"Before things get wiped out, we will do an editorial review and decide if we need to keep some listings in, if they are absolutely essential," Adams said.

I Never Signed Up! What's This Message?

An area of confusion that I've seen has been where people are fearful that LookSmart is charging them for clicks even though they haven't signed up for the new program. This won't happen, but here's why you might get that impression.

Even if you don't take up the offer, LookSmart will have already transitioned your site into the new program and will be deducting clicks from your "new" account. You may even receive a notice tell you that your click "charges" have reached the "monthly budget level" that "you have set for your account" and that you need to increase your budget to have your site appear again.

Don't panic. If you do not log into your new account, or if you do log in but don't change your budget to exceed the amount of free clicks you are entitled to, then you shouldn't be charged anything at all to the credit card that LookSmart may have on file for you.

LookSmart clearly could have avoided this confusion by using better language in the messages they send out, such as "Your free clicks have now been used up. If you want continuing traffic, you'll need to purchase more."

MSN's Role

MSN Search occupies a unique position among LookSmart's distribution partners. LookSmart won't quantify exactly how important MSN Search is to it, but the massively popular service clearly provides more reach and traffic to LookSmart's listings than any of the company's other distribution partners. MSN Search is also the only major partner not to rebrand LookSmart's results. Instead, MSN Search applies its own ranking algorithms to the LookSmart database.

MSN Search stands to gain revenue through the LookSmart change, but the service insists that relevancy remains the most important factor to it.

"LookSmart's a great partner of ours," said John Krass, MSN Search's director of business planning. "At the same time, though, we look to them for a high quality directory. If we think they are doing the wrong thing, we'll tell them."

And so far, Krass said MSN Search is not concerned that anything's going wrong with LookSmart.

Non-Commercial Listings Unaffected

Non-commercial listings at LookSmart-owned Zeal.com remain unaffected by the new LookSmart Small Business pricing model. Indeed, there may be even commercial sites who provide non-commercial content that is listed through Zeal. That non-commercial content should continue to be listed for free.

Conversely, there are apparently a small number non-commercial web sites that may have used LookSmart's paid submission programs in the past, before Zeal was established as the means for LookSmart to gather paid listings. LookSmart says it is proactively trying to identify them and move them into the Zeal listing area, where they will not have to pay any fees.

"There are a handful of charities that got listed through the paid program, so we're going to hand hold them into Zeal," Wingerson said.

If you are one of these people, you should feel comfortable getting in contact with LookSmart, so that you can avoid having your listing accidentally deleted.

Is The Program Worth It?

Is LookListings Small Business a "must do" option for small businesses who are newly submitting to search engines? Maybe. You do need to consider it, and it probably will still be worthwhile for most small businesses. However, LookSmart is no longer the absolute must that it was in the past.

Previously, paying the LookSmart one-time submission fee was an easy decision to make, because the value in traffic was greatly returned over time for the vast majority of people. With the new cost-per-click pricing, the decision is far less straight-forward.

If you are simply after traffic, and as much as you can get, LookSmart will be attractive. That's especially so if you can make any visitor to your site pay off for $0.15 per click. However, everyone will need to weigh this decision individually. Sites that are on a tight budget might decide they simply have to forgo LookSmart, especially if they are already not making use of other cost-per-click programs such as paid listings through Overture.

A longer, more detailed version of this article is
available to Search Engine Watch members.
Click here to learn more about becoming a member

LookListings Small Business
http://listings.looksmart.com

LookListings Small Business Terms
http://listings.looksmart.com/top_pop.jhtml?page=help/Terms

Letters About LookSmart's Cost-Per-Click Change
The Search Engine Report, May 6, 2002
http://searchenginewatch.com/sereport/02/05-letters.html

A sampling of letters received by Search Engine Watch relating to the change by LookSmart to cost-per-click pricing.

WebmasterWorld: Directories Forum
http://www.webmasterworld.com/forum17/

Lots of threads and people upset about the LookSmart change can be found here

Search Engine Forums: LookSmart
http://searchengineforums.com/bin/forumdisplay.cgi?action=topics&number=10

Again, more threads on the change and complaints about LookSmart's move.

ActDumb.com
http://www.actdumb.com

Features links to forum threads on the topic of the recent LookSmart change. Also has satirical press releases about the new LookSmart program.

LookSmart PPC
I-Search #420, April 18, 2002
http://list.adventive.com/archives/i-search.html

Selected comments and experiences about the LookSmart change, and they continue on into following issues. Enter the April 2002 archive link, then look for the issue with the above headline. Other LookSmart issues are also easy to spot.

L$ Reponse to Existing Customers
ihelpyou forums, April 2002
http://www.ihelpyouservices.com/forums/t2806/sc7f63ed11ef6ebf81fd354374152348d.html

Example of "activation" letter sent out to former LookSmart small business people.

LookSmart Looks Dumb Again
Traffick, April 19, 2002
http://www.traffick.com/article.asp?aID=53

Search engine marketing expert Jill Whalen is not pleased with the LookSmart change, finding the new program confusing, seemingly riddled with fees and the retroactive move to be unfair.

LOOKs Can Be Deceiving
The Search Light, April 21, 2002
http://www.high-search-engine-ranking.com/LOOKs_Can_Be_Deceiving.htm

Another review of the problems web site owners are encountering in the wake of LookSmart's changes.

LookSmart Answer Their Critics
The Search Light, May 3, 2002
http://www.high-search-engine-ranking.com/LookSmart_Answer_Their_Critics.htm

LookSmart Australia's CEO comments on the changes made by LookSmart in the US, as well as LookSmart Australia's move to an annual fee basis and the new distribution of paid listings into Yahoo Australia & New Zealand.

LookSmart In Bed With ScumLords
http://scumware.com/hall1.html

I've not had a chance to investigate exactly which listings LookSmart provides to eZula's TopText software, the system that places advertiser links on other people's web sites without permission of the site owner. A summary of the system from those against the partnership can be found here.

Woman claims Ryanair reneged on free travel prize
Irish Times, Feb. 28, 2002
http://www.rte.ie/news/2002/0228/ryanair.html

Ryanair's one millionth passenger was awarded free flights for life in 1988. Nine years later, the airline tried to limit her flights, prompting a court case.

Looking smarter
BRW, April 11, 2002
http://www.brw.com.au/stories/20020411/14020.asp

Looks at how LookSmart's stock has risen in the wake of growth in listing sales.

Letters About LookSmart's Cost-Per-Click Change
The Search Engine Report, May 6, 2002

A sampling of letters received by Search Engine Watch relating to the change by LookSmart to cost-per-click pricing. Companion piece to this article.


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