LookSmart Details What Went Wrong

Search engine marketing firm LookSmart blamed its disappointing fourth-quarter results on its failure to pursue advertisers for keyword categories that generated high click volumes.

LookSmart reported a loss of $1.5 million for the quarter, on revenues of $16.5 million. Both figures kept with revised guidance the company issued earlier this month.

“Our sales effort wasn’t deep enough or effective enough,” said CEO Dave Hills, speaking on the company’s conference call announcing earnings. “We didn’t focus on the categories that would drive the business forward.”

This was due to a failure to track query and click volume in a detailed enough manner, said Hills. As a result, the sales staff wasn’t aware of categories with underutilized inventory.

Hills said the company has since put technology in place to better track volume in different verticals, so salespeople know what types of advertisers to pursue.

Where LookSmart suffered, company executives said, was in average revenue per click. The company brought in only $0.14 per click in the fourth quarter, as compared to $0.17 per click in Q3. Paid click volume, by contrast, grew in the fourth quarter, to 115 million from 103 million in the previous quarter.

“As our match rate fell, what started to run instead of highly targeted ads were ads from our inclusion feed,” explained Hills. “CPCs [define] for that type of ad tend to be lower. As our match rate fell away from key terms on key categories for us, the stuff that got clicked on had a lower CPC.”

Besides the new technology, LookSmart has also brought aboard a new sales head. Bryan Everett, SVP sales, will lead the paid listings and syndicated technologies division.

The company expects to bring in revenues of $12 to $14 million in the first quarter of 2005, resulting in an adjusted next loss of $4 to $5 million.