LookSmart Enters Paid Listings Fray

LookSmart on Thursday took aim at search industry heavyweights Google and Overture Services with the introduction of a rival keyword listings product.

The company’s Sponsored Listings, however, will have limited distribution compared to Google’s and Overture’s. For now, the listings will appear on CNET, Road Runner and Cox Internet, as well as metasearch engines like Mama.

LookSmart hopes to win major distribution from portals looking for a paid search provider that is not a competitive threat, with MSN being the key prize. Overture currently supplies the paid search for Microsoft’s portal, but the future of that relationship is up in the air since the search player agreed to be acquired by MSN rival Yahoo.

“Our goal is to go after the higher-quality distribution,” said Dakota Sullivan, LookSmart’s vice president of marketing.” There are only three companies with the capacity to serve the major distribution partners. Two of those, Google and Overture, already have their own agendas.”

The argument is a carbon copy to the one Overture made against Google, until it inked the deal to be acquired. While Overture is committed to maintaining the MSN deal, it expires in December 2004. Meanwhile, MSN is investing heavily in search, although for now it says it has confined its efforts to the algorithmic side.

“I think key to [Sponsored Listings’] success will be whether Microsoft would adopt it and whether they’d replace Overture with it,” said Fredrick Marckini, chief executive of search marketing firm iProspect, which is a reseller for LookSmart, Overture and Google. “I don’t think Microsoft is pleased with giving money to a competitor.”

LookSmart and MSN have long had a close partnership — perhaps too close. Last quarter, Microsoft accounted for about two thirds of LookSmart’s revenues from carrying its paid inclusion listings. This has left LookSmart in a similar position to Overture prior to the Yahoo deal, only LookSmart is reliant on a single partner for a lion’s share of its business.

This danger was brought home in August, when LookSmart disclosed that MSN was experimenting with a new way of displaying search results that would eliminate the directory layer of listings provided by LookSmart. The agreement between the two companies remains in limbo, set to expire in two months.

LookSmart said its pay-for-placement keyword advertising system would work along the same lines as Google’s, returning keyword ads based on a combination of bid price and click-through rate. Sponsored Listings will have a minimum bid of 15 cents, higher than both Google and Overture.

With more than 30,000 advertisers using its paid inclusion product, LookListings, the company hopes to quickly build a sizeable base of advertisers that will in turn attract big-league distribution partners. LookSmart also offers non-paid search through its WiseNut technology, giving it the ability to offer potential partners three key elements of search.

“It should be relatively easy to move their existing customers over to the [Sponsored Listings],” Marckini said. “This is going to come down to a battle of distribution and who’s got the best business development teams.”