December 15, 2003

The future is looking increasingly bleak for LookSmart, which is planning to lay off half of its workforce following the loss of its biggest client and chief revenue source, MSN, and several other key partners.

The troubled search firm said in a regulatory filing late last week that it would restructure its operations over the next two quarters, which will significantly reduce its operating costs.

"The restructuring will include a reduction of approximately one-half of our employees, and will affect all of our domestic and international offices," the filing said.

The filing also revealed that the company has lost two more key distribution partners Sprinks, now owned by rival Google, and Inktomi, which was bought by Yahoo last year.

Both companies, which together accounted for about 5.7% of LookSmart's listings revenues and 4.9% of paid clicks, have decided not to renew their agreements with LookSmart. The Sprinks agreement expired on 11 December, while the Inktomi partnership is set to expire on 24 February 2004.

The company said in the filing that it expects listings revenue to decline significantly in the first quarter of next year as a result. However, the loss of the MSN deal, which accounts for around two thirds of the company's listings revenue, will have the biggest impact, and is the primary reason for the company's restructuring.

Microsoft-owned MSN said in October that it would stop using LookSmart listings from 15 January 2004 due to lack of performance. MSN is continuing instead with search tools provided by chief rival Yahoo's Overture PPC business, alongside its own search tools, which it said gave better results.

Last week, LookSmart informed its UK customers that it would close its London office early next year after coming to the conclusion that it will be unable to operate profitably in Europe next year.

The company said in its filing that it could undertake additional restructuring in 2004, to further reduce costs.

Source: Net Media

        

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