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|Type||Public (NASDAQ: LOOK)|
|Founded||1995 as Homebase|
|Headquarters||San Francisco, California, File:Flag of the United States.svg United States|
LookSmart (NASDAQ: LOOK) is a search advertising network and management solutions company based in San Francisco. LookSmart provides search advertising products and services to text advertisers, as well as targeted pay-per-click search and contextual advertising via its Search Advertising Network. For publishers seeking to create their own branded vertical advertising networks, LookSmart also licenses and manages search ad networks using its award-winning AdCenter platform. LookSmart is one of the five founding members of the IAB Click Measurement Panel.
LookSmart was founded in Melbourne Australia in late 1995 (it was originally called Homebase) and was majority-owned by Reader's Digest, who had aspirations to develop a female- and family-friendly portal to supplement their legacy magazine business. After leadership and strategy changes at Reader's Digest, the company was bought back by founders Evan Thornley and Tracy Ellery, along with Martin Hosking. During 1997, the company sought venture capital funding, and on several occasions came close to the financial brink. Venture capital funding from Australian and US sources was obtained in 1997 and 1998, and the company relocated its head office to San Francisco.
Deal with Microsoft
Recognizing the difficulty of building a consumer-oriented brand, LookSmart built a new strategy around licensing its search directory to a wide range of portals and internet sites. A significant amount of Looksmart's revenue stemmed from a lucrative licensing deal with Microsoft, signed in 1998, to provide directory and listing services.
Initial Public Offering
LookSmart went public in August 1999, as part of the widespread technology boom in Silicon Valley. Their stock debuted at US$12 per share, and reached a high in excess of US$70 in early 2000. Australian venture capital investors such as the CHAMP group (via their fund Australian Mezzanine Investments) made very strong gains on their pre-IPO investment.
The Decline of the Online Advertising Market
The company was hit by the "tech wreck" in 2000. As with the rest of the industry, LookSmart lost a significant number of major advertising customers who went to bankrupt in 2000, and was forced to reduce expenditure and lay off a large number of staff in early 2001 to survive.
Evan Thornley and Tracey Ellery had sold stock after the expiration of the "lock-up" on company officers after the IPO, but suspended their stock sale program in 2000 once the stock price went below the IPO price of US$12. They resumed their stock sale program in 2004.
The Later Years with Microsoft (2001 - 2003)
After major cost reductions in early 2001, the company chose to focus on its relationship with Microsoft, and in particular, the development of a paid listings business. LookSmart's listings and licensing business, both dominated by a contract with Microsoft, quickly became its major source of revenue. In 2002, the company became profitable.
In mid 2002 Evan Thornley announced his intention to return to Australia and resigned as Chief Executive. At the time, there was division on the Board over the process to appoint a new CEO and as a result 3 directors resigned from the Board in 2002, and new directors were appointed.
In 2002, LookSmart also changed its previous "submit a site" model where businesses could pay a fee to have their site listed in the LookSmart directory, and adopted a pay-per-click model. This led directly to a class-action lawsuit, which was settled in September 2003 by LookSmart offering free clicks to businesses whose websites had been listed under the previous system.
A number of internet companies, including LookSmart, were affected by state and federal government action in the United States against internet gambling sites. All major search engines were involved in an inquiry by the US Attorney-General, and subsequently LookSmart and all other major search engines agreed to cease accepting text advertisements from internet gambling companies.
In late 2003, Microsoft announced that it would not renew its contract with LookSmart, which at the time accounted for over 70% of LookSmart's revenue. As a result of the company's dependence on this revenue, large-scale sackings and redundancies occurred, including the closure of all non-US operations, all of which were unprofitable.
Evan Thornley stood down as Chairman in May 2004 and was replaced by Teresa Dial, a former CEO of Wells Fargo. In May 2005 Evan Thornley and Tracey Ellery announced that they would not stand for re-election to the Board of Directors at the conclusion of their terms in June 2005.
A new US-based CEO, David Hills, was appointed in October 2004, and added several new executives and attempted to diversify LookSmart's revenue streams while still continuing to post losses similar to those from the Thornley era.
In June 2007, John Simonelli, the chief financial officer, announced his intention to resign upon the appointment of a replacement.
On July 26, 2007, CEO David Hills resigned. The company said that he left to start his own business. Board Chairman Ted West assumed interim CEO duties.
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