Issues With The LookSmart Cost-Per-Click Transition

Issues With The LookSmart Cost-Per-Click Transition

By Danny Sullivan, Editor
The Search Engine Update,
May 6, 2002

It's been almost a month since LookSmart switched commercial "small business" listings to a cost-per-click payment model. How is the transition going? According to LookSmart, wonderfully. According to forum posts, letters and people I've spoken with, it's a nightmare. Let's take a look at some of the issues that have cropped up and explore this wide difference of opinion.

"Tremendous," is how LookSmart vice president of marketing Dakota Sullivan described the new program's rollout. "We've had over 5,000 sales, thousands of legacy customers who have gone in an activated their accounts, Sullivan said. "We are proceeding well ahead of our expectations."

If you take LookSmart at its word, then the new program isn't driving people away. I certainly see no reason to doubt that new people are signing up. If you were brand new to LookSmart and had never been involved with the flat-fee submit programs, then you'd weigh the current offering up against other cost-per-click programs offered by Overture or Google and perhaps consider it.

Even Fewer Listings May Still Mean More Money

On the other hand, the LookSmart figures might not be so rosy. From January through March of this year, according to LookSmart's financial documents, the company had 13,000 small business sign-ups. That's 4,300 listings per month. Breaking the 5,000 mark for April sounds great, but that also involves the admitted conversion of thousands of existing customers. The number of new people signing up might be much lower than with the old one-time fee programs.

Of course, fewer sign-ups isn't bad for LookSmart if they generate more money than in the past. And, according to what people in the new small business program are reporting, this could be substantially more money.

Since the transition, LookSmart has begun sending notices to anyone with a small business listing when they've reached their "monthly budget levels." These notices estimate how much is needed to keep listings going, and the amounts can be in the hundreds of dollars, if not over $1,000.

Worst case, even if LookSmart loses a large number of customers and fails to attract as many new ones as in the past, it could still be well ahead financially, given that it could be earning many times more per month on the remaining listings than under the old single-payment system.

Impact On Relevancy

There's an important assumption in this, however. LookSmart will have to prove that it can maintain relevancy even if many listings have been lost, otherwise its most important partner MSN is likely to reevaluate whether LookSmart's data should continue to be used.

LookSmart has previously said relevancy will be maintained in a number of ways. For one, the non-commercial listings from Zeal remain unimpacted by the small business transition. Secondly, LookSmart says it will review any commercial listings before they are permanently deleted from its database. More on this in a moment, but let's look now at the third argument, that the small business listings make up only a tiny portion of LookSmart's directory.

LookSmart maintains about 2.5 million listings. Of these, around 95,000 are small business listings, or 4 percent of the directory. In part, LookSmart's defense that relevancy won't be harmed comes from the fact that even if all of these listings disappeared, which is unlikely, the directory still has a huge representation of the web's content.

By the way, some of that remaining content is listings from the other LookSmart paid program, LookListings. However, URLs from LookListings probably number in the 100,000 to 200,000 range, so it's another smallish chunk of the total listings. I'm reconfirming figures, but the vast majority of LookSmart's listings do seem to be either non-commercial content or "free" commercial listings that were never involved in a LookSmart paid submit program.

Editorial Review Before Delete Policy

Now let's go back to this "editorial review before delete" policy. Many people are already getting notices that they've been removed from the directory on a temporary basis, because they used up their free clicks. How does such an automated removal match up with LookSmart's past claims that no listing would be removed until it was reviewed editorially to determine if the listing was essential to relevancy?

The answer is that while the notices are sent automatically, the pulling of sites even on a temporary basis doesn't actually happen until LookSmart's editorial team approves it.

"We know exactly whats coming up for capping," said LookSmart editor in chief Kate Wingerson, using the company's internal term "capping" for disabling a listing that's reached its monthly budget. "I have a team of folks who focus on that list."

Wingerson said she couldn't provide an average number of listings per day that need to be reviewed, only that LookSmart could "easily cover" the numbers that come up to assess if they should be kept running for relevancy reasons.

So, as reported earlier, it is possible that your site might be kept in the database, even if you don't pay. However, LookSmart has also previously indicated that they feel they've spotted most sites that likely require such capping protection. Given this, I wouldn't hold out much hope that your site might make it through. Most probably will get killed, if they refuse to pay.

I Never Signed Up!

Another area of great 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. For example, one reader with two listings who hadn't upgraded forwarded this email from LookSmart:

"Your Small Business Listing click charges for this billing period have reached the monthly budget level of $30 that you have set for your account. This means that traffic from our network to all listings in your account has been temporarily interrupted."

The reader was concerned because he was adamant that he hadn't upgraded his account. He was correct. LookSmart had upgraded it for him, and using language such as "Account Activity for billing period" in the email, showing the last four digits of his credit card number and saying "that you have set for your account" implies that some type of billing relationship in the new program had been established.

What's really happened is that LookSmart has taken everyone who paid a one-time fee in the old programs and moved them into the new program, where they are given $15 worth of free clicks per month. If you do absolutely nothing, you'll continue to get those free clicks. If all the clicks get used up in a particular month, then LookSmart will send you an email such as the one shown above. Your "monthly budget level," which you never set, is simply the amount of free clicks you were given.

For example, if you had signed up for one listing associated with your email address, then your monthly budget level will be $15. If you signed up for two listings, then your monthly budget level is $30, $15 worth for each listing.

How about that credit card number being shown? When you originally paid with LookSmart, they had your credit card number on file. This is where the information is likely coming from. However, 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.

LookSmart clearly could have avoided this confusion by using better language in the messages they send out. For people who never set a "monthly budget level," telling them that the amount "that you have set" is borderline misleading. The company clearly wants old customers it transitioned into the new program to convert, and the emails are a way to alert those customers that they are about to lose traffic. However, those who didn't actively choose to be in the new program should have gotten special emails that better clarified the situation. Saying something as simple as "Your free clicks have now been used up. If you want continuing traffic, you'll need to purchase more" could have met LookSmart's goals without creating panic or concern.

Upset Over Retroactive Move Continues

Of course, most concern that I'm hearing revolves around people upset that the program was made retroactive. There continues to be a strong feeling that it is unfair for LookSmart to have done this to listings where a submission fee was previously paid, though LookSmart itself claims this upset is only from a small group of between 50 to 100 people or search engine optimization firms.

"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," Sullivan said. "The silent majority is transitioning just fine."

It is true that online forums sometimes bring out extreme views, in that people who are upset about something seek an opportunity to express their displeasure while those happy stay quiet. However, I would say that forum activity on this issue feels unprecedented. There seem to be many people upset, probably far more than LookSmart wants to admit to.

Indeed, at the Search Engine Strategies conference in London last month, we had an open forum at the end of the first day. Unprompted, the first topic raised by the group of about 40 people was over the LookSmart change.

As the discussion developed, I paused to do a "show of hands" on two key issues. How many were upset that LookSmart was now charging new sites for clicks? A couple of hands went up. How many felt it was unfair LookSmart was putting old sites that previously paid a submission review fee into the same program? Nearly all the hands went up.

Account Management Concerns

For its part, LookSmart said there are three key areas of major concern it is hearing. The first is from search engine marketing firms and others with multiple listings associated with one credit card, who want to break those up into different accounts. The second is the opposite, those who have multiple listings associated with different credit cards that they want to consolidate into one single account.

In both cases, LookSmart says it is working to come up with a way to accommodate both demands. That will be a relief to reader Thierry Carries Naar, who earlier this month asked LookSmart about consolidating the 26 different listings he manages into one master account.

Naar said LookSmart's customer service wrote back that he would need to cancel a listing, add it to another account by paying a new fee and that the free clicks from the cancelled listing wouldn't be transferred.

"They force us to change to a different method but won't give us support to make the changes," Naar wrote.

LookSmart didn't say what its solution will be, only that those who are in this type of situation should get in touch with the company's customer service team.

SEO Business Model Concerns

The third major concern LookSmart says it has been hearing is from search engine marketing companies who have clients that have never paid for services on a cost-per-click basis. These companies feel they can't bring the new LookSmart program to their clients. LookSmart wants to help make this possible, it says.

"There are people who have problems migrating their business model to that, and we are aggressively outreaching to those people," said Peter Adams, LookSmart's chief technology officer.

What can LookSmart offer folks in this situation? The company was short on specifics. One thing is that LookSmart is working on are materials that search engine marketing companies can distribute to clients, to bolster the perceived value of cost-per-click pricing.

The company further assumes that search engine marketing firms will make back their time in promoting LookSmart as "value added resellers" by adding their own fees on top of LookSmart's charges. This is important because for small business listings, LookSmart will not share any revenue with the firms.

"We assume SEOs are able to add on top," Sullivan said.

LookSmart did recently launch a program for large resellers, the "Search Targeted Marketing Partner Program," which may be allowing for discounted clicks. In turn, that might mean search engine marketing firms in the program wouldn't have to mark up over "list price" to make up for their time. I expect to be bringing more details about this program in the near future. Some basic links are below.

Another area where LookSmart says it is helping is by raising awareness of its LookListings program, where better tracking can be offered to search engine marketing firms who need that for their clients with large budgets.

Program May Change, But Cost-Per-Click & Retroactive Won't

Perhaps more specific solutions will also emerge in the future, as more feedback flows into LookSmart about what's needed. The company seemed somewhat surprised over some of the previously described situations that came up, along with others.

"Our first step or goal is to understand and catalog the scope of the situations the SEOs are facing," Sullivan said.

Oddly, you would have assumed LookSmart had a pretty good idea on what the search engine marketing community needed before it launched a radical new program such as LookListings Small Business, especially when LookSmart previously said it had created that program in response to the demands it was hearing from SEO firms.

While the program is likely to change, don't expect LookSmart to back away from basic idea of cost-per-click pricing or the company's decision to make such pricing retroactive, however.

"There are people who just fundamentally don't want to participate in a cost per click program, and there's really nothing we can do with that," Adams said.

Moving Forward

So a month after the LookSmart change, what to do? Again, if you are uncertain, you don't have to do anything. You have until the middle of July before the offer to get your free clicks extended expires.

Until then, LookSmart will continue to list your site, though it MAY suspend your listing if you use up the free $15 worth of clicks it has assigned to you. However, don't necessarily believe this has happened, just because you receive an email saying it has. Numerous forum posts have appeared where people say they received a warning and continue to be listed. Why? There could be various reasons, such as:

  • It takes time from when you disappear on LookSmart for that to happen on MSN Search, between a few hours to maybe a couple of days. So, if you are checking on your status in LookSmart by watching MSN, take this delay into account.
  • It could be that LookSmart has decided your site shouldn't be capped for editorial reasons. In that case, if you ignore the July deadline, it could be that you'll continue to be listed in the long term. This is a gamble, however -- if the listing is bringing you good traffic, and if you can afford to pay the LookSmart fees, then it may be a gamble you don't want to take.
  • It could be that MSN itself is listing your site associated with a particular search. For important queries, MSN's editors will hand pick sites to show up. If you are one of these sites, your listing should remain independent of what LookSmart does nor should you be getting billed for LookSmart clicks. Unfortunately, there's no way to know if this is happening.
  • It could be you are listed in the Web Pages section of MSN Search's results. Those are listings from Inktomi and are independent of what LookSmart does.

If you are uncertain, you can also contact LookSmart. The company says that many concerns it sees raised on forums or in email to it are misunderstandings about the new product, and when explained, "more than half" choose to activate their accounts. So put your questions to LookSmart directly, if you haven't already, and see if you feel better about the response you get.

Not bothered about the change, because you have the budget and want the traffic? Then go ahead and log-in to claim your free clicks over the long-term, as well as to adjust the budget setting to a situation that makes sense.

Getting told that your listing is generating a huge, almost unbelievable number of clicks? It could be true. MSN is a giant driver of traffic, and this is why LookSmart wanted to move to cost-per-click pricing, to better recoup the value of its listings.

"People had no idea how much traffic they are getting from LookSmart," said Sullivan. "With our distribution network, we deliver a ton of traffic to people."

Then again, you'll want to review the clicks you are charged with your own traffic logs, just as you would with any cost-per-click program. You may see some discrepancies, but they shouldn't be hugely significant. If they are, then absolutely go back to LookSmart and enquire about them.

Remember, LookSmart does have distribution beyond just that at its own site and at MSN. The company should be able to help you identify the other sources that might appear in your logs. Also be aware that if you have multiple listings in the same account, they will share the budget (or your free clicks) unless you specifically give each listing its own setting.

Alternatives To LookSmart For MSN Coverage

Had it with LookSmart but still want to be represented on MSN Search? Look into Overture or Inktomi.

Overture will guarantee your placement for terms you select at MSN Search, as long as you are one of the top three bidders for that term at Overture (with some exceptions). Of course, you'll probably pay more than the $0.15 per click that LookSmart is charging, but check on it.

I'm also follow up on some forum rumors that Overture bids are only appearing at MSN Search if they are above the $0.15 amount, which could be an attempt by MSN to prop up the value of getting a LookSmart listing.

As for Inktomi, the company listings usually come up at MSN Search for more unusual or very specific listings.

LookSmart Changes To Cost-Per-Click Listings
The Search Engine Update, April 17, 2002

Previous article about the new LookSmart change to cost-per-click pricing for small business listings.

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.

LookSmart Looks Dumb Again
Traffick, April 19, 2002

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

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

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.

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

What Are You Telling Your Clients?, April 17, 2002

Nice thread here about how people are handling the LookSmart change from a client perspective.

LookSmart PPC
I-Search #420, April 18, 2002

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

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

Has Anyone Been Delisted Yet?
Search Engine Forums, April 18, 2002

Initial comments from people being told they were deactivated but still finding their listings.

LookSmart In Bed With ScumLords

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.

LookSmart Partners Page

Very short summary about the Search Targeted Marketing Program with a link that leads to existing partners but no info on how new companies can enroll or what's provided.

LookSmart Launches Search Targeted Marketing Partner Program
LookSmart, Jan. 23, 2002

Press announcement of the program with contact details.