LookSmart Pains On 4Q Revision

LookSmart evinced the pains of an ad-dependant revenue model Thursday with a disclosed drop in 4Q 2000, cutting revenue for the quarter to approximately $30 million, down nearly $6 million from prior projections, and posting a per-share loss $0.02 to $0.03 wider than earlier First Call estimates of $0.12.

As a result, LookSmart plans to consolidate its 11 operating groups into four and cut its staff by 31 percent.

The San Francisco-based Web directory, which has grown to reach an estimated 83 percent of online users with its listing service, is suffering the same woes of many of its big name portal partners like Excite, AltaVista and Yahoo!, all of which have directory deals with LookSmart, and all of which experienced considerable drops in ad revenue last year.

Looking to tap into a more focused advertising model, CEO Evan Thornley says the company is accelerating the development of its targeted listing business, specifically its Subsite Listings service launched in 3Q last year. Already in use by Amazon and eBay, the Subsite service provides direct links to specific departments throughout large Web sites, allowing consumers to link directly to the subsites rather than drill through a business’ main page. After being integrated into LookSmart’s directory, for example, eBay users were able to perform normal Web searches to find specific auction services, not just throughout eBay’s site, but throughout the entire LookSmart database, while maintaining eBay’s branding. The service also enables companies to target users based on their search strings, serving up contextually relevant ads or other information during a search.

“Our highly targeted listings businesses grew over 40 percent from the third quarter despite very negative industry trends,” says Thornley. “Our listings businesses overall have generated $10 million in their first three quarters, and we believe that at this time of industry transition [that] it is critical to completely focus on the large emerging Listings opportunity.”

The company closed Thursday at $3.094 per share, down markedly from its 52-week high of $72.

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