LookSmart
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Looksmart is an internet company that owns the Zeal internet directory, WiseNut search engine, experimental Grub distributed web-crawling project, FindArticles premium content search, NetNanny desktop parental controls software, and the Furl.net personal web and social bookmarking site. Looksmart was founded by Australian husband and wife Evan Thornley and Tracey Ellery in 1995. They both served as senior executives of Looksmart and both remain on the board of directors.
In recent years, Looksmart has relied on the work of editorial staff and tens of thousands of contributors in building up the associated Zeal directory. Critics of Zeal argue that DMOZ is a more democratic version of a volunteer produced directory. Critics of DMOZ argue that Zeal provides a transparent and accountable model for shared editing of the directory.
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High Valuation in Technology Boom
Looksmart initially aimed at replacing Yahoo! Then it presented as a women and family friendly version of Yahoo! It initially attracted Reader's Digest as an investor who later sold most of their interest back to Evan Thornley and his wife Tracey Ellery for a nominal amount as its losses mounted. Looksmart relied on the internet boom to raise venture capital from a mix of Australian and US investors prior to its IPO in 1999. Despite enormous losses, it briefly enjoyed a market capitalization around five billion dollars. Under Evan Thornley's stewardship tens of millions of dollars were spent on activities later judged to be of little benefit, and arguably designed to prop up the share price with new announcements including multi-million dollar sponsorships of Sesame Street and Mystery on PBS, an aborted TV advertising campaign, the 2000 Olympics, several unsuccessful acquisitions including the purchase of late-night infomercial company Guthy-Renker's ecommerce division which were later written off.
Looksmart failed to create a consumer brand of any significance and then built its new strategy around licensing its search directory to then popular and successful portals such as Lycos and Infospace. Much of Looksmart's revenue stemmed from their primary client, Microsoft, and then from referral fees and commercial listings salted into the directory, which ultimately appeared in search results on partner sites. The editorial portion of the directory came to be seen merely as a cost liability, and Zeal.com was acquired to replace paid editors with web-based volunteers (referred to as "thirty-year-old virgins" by some satirically-minded employees).
Later acquisitions included several more failed companies, whose managers and technical personnel were brought in-house to replicate their success. Primary Knowledge was bought to supply better ad-performance reports to paid listings customers. Wisenut was supposed to help the company break into the algorithmic search market (as Teoma helped AskJeeves), but languished once brought in-house. These acquisitions and promotions, combined with the company's top-down approach to product development, wasted millions and smothered employee morale.
In 2003, Microsoft announced its support would be withdrawn, resulting in a loss of as much as 90% of Looksmart's revenue. Looksmart claims the loss of revenue was nearer 70%, although that fails to include the expected decrease in advertising revenue from those advertisers who are now going directly through MSN. In August 2004, Interim Chief Executive Damian Smith acknowledged that Looksmart had been "hooked" on Microsoft revenue during Evan Thornley and Jason Kellerman's period as Chief Executive.
Inital Public Offering
LookSmart went public in August 1999, as part of the widespread technology boom in Silicon Valley. Their stock debuted at US$12 per share, and reached a high in excess of US$70 in early 2000, before being hit by the "tech wreck" in 2000. LookSmart lost a number of major advertising customers to bankruptcy in 2000, and was forced to lay off a large number of staff in early 2001 to survive.
Evan Thornley and Tracey Ellery had sold stock after the expiration of the "lock-up" on company officers after the IPO, but suspended their stock sale program in 2000 once the stock price went below the IPO price of US$12. They resumed their stock sale program in 2004.
2001-2003 - the Microsoft Years
After major cost reductions in early 2001, the company's listings and licensing business, both dominated by a contract with Microsoft, quickly became its major source of revenue. In 2002, the company became profitable, largely on the back of the Microsoft contract.
Evan Thornley resigned as Chief Executive in mid-2002. At the time, there was division on the Board over the process to appoint Jason Kellerman as new CEO. As a result, 3 directors resigned from the Board in 2002, and new directors were appointed.
In 2002, LookSmart also changed its previous "submit a site" model where businesses could pay a fee to have their site listed in the LookSmart director, and adopted a pay-per-click model. This led directly to a class-action lawsuit, which was settled in September 2003 by LookSmart offering free clicks to businesses whose websites had been listed under the previous system.
A number of internet companies, including LookSmart, were affected by state and federal government action in the United States against internet gambling sites. All major search engines were involved in an inquiry by the US Attorney-General, and subsequently LookSmart and all other major search engines agreed to cease accepting text advertisements from internet gambling companies.
Effects of the Loss of Microsoft's Support
Microsoft's decision not to renew their contract with LookSmart led to a major reduction in revenue, and a change in management, as Chief Executive Jason Kellerman resigned in January 2004, replaced on an interim basis by the CEO of LookSmart's international operations and company veteran Damian Smith.
Confronted by a very significant reduction in revenue, Looksmart sacked nearly half of their staff, tried to curtail other expenses, and sold its Australian business to Australian telecommunications giant Telstra with the majority of staff retained by Telstra's subsidiary Sensis, and also sold its Japanese operation, again with most employees offered employment by the new owner.
Evan Thornley stood down as Chairman in May 2004 and was replaced by Teresa Dial, a former CEO of Wells Fargo. In May 2005, LookSmart announced that Evan Thornley and Tracey Ellery would not stand for re-election to the Board of Directors at the conclusion of their terms in June 2005.
A new US-based CEO, David Hills, was appointed in October 2004, and has since added several new executives in an effort to return the company to profitability.
Furl.net
furl.net is a service provided by LookSmart which enables the saving of web pages on to a personal account on a remote server, allowing searching and retrieval from any internet-connected personal computer. It is the first (and to date, only) such service of this kind.
External links
- [http://search.looksmart.com Looksmart's site
- Consumer Fraud Lawsuit from Looksmart customers (http://aboutus.looksmart.com/about.jhtml?dir=profile&page=notice)
- Looksmart penalized by Federal Trade Commission for deceptive advertising (http://news.findlaw.com/hdocs/docs/looksmart/looksmartftcord.pdf)
- Reasons Why Microsoft’s MSN Dumped Looksmart’s Search Results - Non-Official Explanation (http://chinese-school.netfirms.com/computer-article-Looksmart.html)
- Alexa Traffic Popularity Ranking (http://www.alexa.com/data/details/traffic_details?&range=2y&size=large&compare_sites=&url=http://search.looksmart.com/)
- Looksmart Interim CEO Damian Smith Interview (http://ext.viomail.com/metrixmedia/?h=200773&r=10B4C5E1-8316-458A-BFA2-E287EBEF3CDA&s=480%20)
- Looksmart not Looking Smart (http://www.smh.com.au/articles/2004/01/21/1074360833933.html?from=storyrhs)
- Collapsed Looksmart share price (http://finance.yahoo.com/q/bc?s=LOOK&t=5y&l=off&z=m&q=l&c=)
- Satirical attack on Looksmart from dis-satisfied customers (http://www.actdumb.com/)ja:LookSmart