MSN To Drop LookSmart

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LookSmart has announced that its deal to provide Microsoft with listings for its MSN Search service is not being renewed, leaving the company without its most important partner.

LookSmart's deal to power the main web search results for MSN in the United States and elsewhere has been extended for just over a month to run through mid-January 2004. However, LookSmart listings will be dropped from the MSN Search UK site by the middle of this month, according to MSN.

Earlier this year, Microsoft announced plans to build its own crawler-based search engine to power results at MSN. The announcement made LookSmart's future seem uncertain, and a late move by LookSmart to release a new paid listings product didn't help in the renewal negotiations.

Losing MSN is a major blow for LookSmart. The deal accounted for about 65 percent of LookSmart's listings-driven revenue. It leaves the company with distribution on a much smaller set of web properties, such as meta search sites operated by InfoSpace and home pages viewed by Road Runner ISP subscribers.

As for MSN, deals with its other search partners Overture and Inktomi remain unchanged. MSN is continuing to take paid listings from Overture and use Inktomi for some of its web search results.

MSN's Next Moves

In fact, Inktomi results are due to get a promotion. When LookSmart's listings are dropped, it will be Inktomi that is to carry the full weight of handling MSN web search results. This is because the MSN crawler remains in development and won't be ready to take over for LookSmart.

"It's going to happen later than that," said MSN product manager Karen Redetzki, when asked if results from the MSN crawler might go live in January 2004. "It's not ready yet. We're still working through letting the MSN crawler crawl the web. We're going to continue to test the formula."

Inktomi's promotion won't last long-term, however.

"When our algorithmic [web crawler” piece comes into play, Inktomi won't be providing those results for us then," Redetzki said.

MSN has plenty of time to prepare its crawler. Its contract for Inktomi results last through December 2005, though MSN has previously said it can terminate that agreement early, if it chooses. That's likely to happen, given that Inktomi is now owned by MSN-rival Yahoo.

Relevancy Over Revenue

Why drop LookSmart? MSN said testing it did at its MSN Search UK site earlier this year found that dropping the listings increased relevancy.

"The testing was conclusive that the more relevant results were outside the LookSmart listings," Redetzki said. "We're not going to talk publicly about how they [MSN Search UK” measured the relevancy or the methodology, but we did see that the test results showed that the relevancy improved."

LookSmart's listings are heavily monetized compared to Inktomi. Nearly all of LookSmart's commercial listings are sold on a recurring cost-per-click basis, while Inktomi results still are massively dominated by "free" listings found from crawling the web. Consequently, the dropping of LookSmart is likely to cost MSN revenue in the short-term.

If so, MSN says it doesn't know and, importantly, doesn't care.

"We actually aren't looking at it form that perspective, so we can't answer that [how much revenues may drop”," Redetzki said. "This goes back to more of the algorithmic piece and the relevancy needed there."

In other words, MSN's first priority is ensure that it has good, relevant search results that come from crawling the entire web. With this solid content, it then hopes it will make money from users who become loyal to the service and who may choose paid listings that are also offered, when these are deemed relevant.

"We do believe that when you have some more relevant results for consumers, the more satisfied and happier the end user is, you'll have more people coming to your web site. That translates into revenue," Redetzki said.

A longer, more detailed version of this article
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