LookSmart Still Isn’t Dead; Finds New Role “Mining Diamonds from the Dirt” in the World of Second-Tier Search Engines

10/4/10Follow @wroush

When a public relations group in San Francisco contacted me to see if I’d be interested in meeting with an executive at LookSmart, my first reaction was “LookSmart? They’re still in business?”

I’d known people at the 13-year-old company back in the dot-com era, after it went public on the NASDAQ (LOOK), won big contracts to provide directory listings and cost-per-click advertisements for Microsoft’s MSN portal and other sites, saw its stock shoot from $12 at IPO to more than $70 in early 2000, and grew its offices near Pacific Bell Park (now AT&T Park) to more than 700 people. But the crash of 2000-2001 decimated online advertising, and then in 2003 Microsoft launched its own search and advertising platform, taking away 90 percent of LookSmart’s remaining volume overnight. The company pretty much dropped off my radar after that.

And many other people’s, too, apparently. Out of curiosity as much as anything, I agreed to meet recently with Gill Brown, LookSmart’s vice president of advertising network sales. Brown told me that when a recruiter called him about the sales position in early 2009, “The first words out of my mouth were, ‘LookSmart’s still in business?’”

These days, Brown explained, LookSmart is a provider of pay-per-click text ads to what the search industry calls “Tier 2″ search engines—everything smaller than Google, Yahoo, and Bing. Together, the Big Three providers—which are really just the Big Two, since Bing now powers Yahoo—control about 95 percent of the search market. But within that last 5 percent are hundreds of other search companies, including moderately well known entrants like Ask, AOL Search, Cuil, Lycos, Excite, AllTheWeb, and Altavista, and many less familiar names. And together, these Tier 2 players field billions of search queries each day—which creates a market for the same type of keyword-based advertising that’s turned the AdWords platform into such a cash cow for Google.

Gill Brown

Gill Brown

Many companies are vying with LookSmart to be, in essence, the AdWords of the Tier 2 world. But the second tier is a messy and unregulated place, where it’s not unheard of for publishers to run scams such as setting up bots that click on ads on their own sites or competitors’ sites thousands of times per hour, generating more revenue for themselves or hitting competitors with outrageous pay-per-click charges. Brown’s focus since joining LookSmart in February 2009 has been on using its vast troves of search data to identify the most secure, reputable, and effective Tier 2 players and making sure that LookSmart’s clients’ ads only show up on those sites.

“We want to be known as the Tier 2 network you can trust,” says Brown. “That’s all about proving to advertisers that we have the quality, and that when there is a hiccup we deal with it like a great company should.” At the same time, LookSmart uses its data to help advertisers determine which ad slots will lead to the most conversions, i.e. actual purchases, and which ones have the most favorable revenue-sharing terms.

These days, all of those decisions are made by software on the fly at the moment a search-results page is being assembled, which means … Next Page »

Wade Roush is Chief Correspondent and Editor At Large at Xconomy. You can subscribe to his Google Group or e-mail him at wroush@xconomy.com. Follow @wroush

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