October 29, 2003

Internet search firm LookSmart reported a profit for the third quarter boosted by a 70% surge in revenue, but did not provide any insight into its future business plan after its key partner MSN said it would drop LookSmart listings from next January.

The company posted a net profit of $1.9m for the three months to September, up from a loss of $500,000 in the same period a year ago. Revenue leapt 70% year-over-year to $23.8m, helped by growth in the number of paid clicks, which were up 87% to 224 million clicks.

LookSmart reiterated its guidance for full year revenue in the range of $147m to $157m and raised its adjusted net income guidance from $4m to $5m, as previously expected, to $8m to $9m. However, the company did not give any guidance for next year, when its financial performance is likely to be significantly impacted by the loss of the MSN partnership - MSN currently accounts for about two-thirds of LookSmart's revenues.

MSN said earlier this month that it decided not to renew its relationship with LookSmart after tests showed that its own search tools combined with those provided by Overture, which it also uses, provided better results than LookSmart listings. Jason Kellerman, LookSmart CEO, said: "We are finalising our go-forward plan of operations as we look past the conclusion of our MSN agreement in January 2004.

"We expect to begin communicating our strategic direction to employees and partners shortly, and we intend to provide investors with a mid-quarter update on our plans." He added that the company was encouraged by its early progress in converting customers to its recently launched Sponsored Listings product and managed to grow its cash position by just under $4m to $61m at the end of September.

However, the company's future hangs in the balance, particularly since its key competitors are Overture, which is now owned by Yahoo giving it access to massive resources, and Google, which is reported to be planning an IPO next March that could value it at anywhere between $15bn and $25bn.

Source: Net Imperative

        

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