LookSmart Guide, Meaning , Facts, Information and Description
Looksmart is a financially troubled internet company, which owns an internet directory, WiseNut search engine, experimental Grub distributed web-crawling project, FindArticles premium content search and NetNanny desktop parental controls software. Looksmart.com was once a Top 15 website and is now struggling to attract traffic following the collapse of a distribution deal with Microsoft.Looksmart was founded by Australian husband and wife Evan Thornley and Tracey Ellery in 1995. They both served as senior executives of Looksmart, formulated its failed strategies and both remain on the board of directors despite the objections of some former board members and institutional investors.
In recent years it has relied on editorial staff and volunteers in building up the associated Zeal directory. Zeal's bigger rival DMOZ is perceived by some as greatly more successful, with over sixty thousand participants and much greater distribution. Zeal has just over two thousand participants.
Looksmart initially aimed at replacing Yahoo Then it presented as a women and family friendly version of Yahoo! It initially attracted Reader's Digest as an investor who later sold most of their interest back to Evan Thornley and his wife Tracey Ellery for a nominal amount as its losses mounted. Looksmart relied on the internet boom to raise venture capital from a mix of Australian and US investors prior to its IPO in 1999. Despite enormous losses, it briefly enjoyed a market capitalization around five billion dollars. Under Evan Thornley's stewardship tens of millions of dollars were spent on activities later judged to be of little benefit, and arguably designed to prop up the share price with new announcements including multi-million dollar sponsorships of Sesame Street, the 2000 Olympics, several unsuccessful acquisitions including the purchase of late-night infomercial company Guthy-Renker's ecommerce division which were later written off.
Looksmart failed to create a consumer brand of any significance and then built its new strategy around licensing its search directory to then popular and successful portals such as Lycos and Infospace. Much of Looksmart's revenue stemmed from their primary client, Microsoft. In 2003, Microsoft announced its support would be withdrawn, resulting in a loss of as much as 90% of Looksmart's revenue. Looksmart says it's nearer 70%, although that fails to include the expected decrease in advertising revenue from those advertisers who are now going directly through MSN. In August 2004, Interim Chief Executive Damian Smith acknowledged that Looksmart had been "hooked" on Microsoft revenue during Evan Thornley and Jason Kellerman's period as Chief Executive.
In years 1999 through to 2001, some of the founders such as Evan Thornley and Tracey Ellery and senior executives made tens of millions of dollars selling what most thought to be its overpriced stock even though the accumulated losses of the company approached one hundred and sixty million dollars. It is believed Thornley also quietly sold shares in Looksmart prior to the IPO in a private sale. Some critics say it was wrong for management to profit from the sale of free shares and options while the company was producing massive losses. Thornley frequently pointed to the value of Infospace, Inktomi in declaring Looksmart to be undervalued at $5 billion and even compared himself with billionaire Michael Dell in justifying his stock sales.
After Thornley's resignation as Chief Executive the founders Australians Evan Thornley and Tracey Ellery resisted a palace coup on the board from independent directors unhappy the husband and wife team intended to remain on the board. The three independent directors, Mariann Byerwalter, Robert Ryan and James Tananbaum resigned in protest at what they saw as inappropriate corporate governance when Thornley and Ellery used their casting votes to elect Thornley to the chair of the company. They were also concerned about class action lawsuits from Looksmart's once loyal customer base alleging consumer fraud and securities fraud lawsuits from Looksmart's shareholders against analysts who had advised the purchase of Looksmart stock which fell from $80 a share in 2000 to as low as $1 in 2002. Some of the lawsuits allege Looksmart underwriters paid secret commissions to prop up their share price after the IPO. The lawsuits do not detail the involvement of Looksmart managers in this illegal activity.
The consumer fraud class-action lawsuit, brought on behalf of customers who had paid a one-time "life-time" fee to be listed in the directory and were switched to a pay-per-click model, was settled in September 2003. Fraud claims exceeded $400,000 with Looksmart's legal bills topping $600,000.
In August 2004, a class action lawsuit was filed that alleged Looksmart conspired with gambling websites to promote the sites to California residents, where it is illegal to gamble on the internet. The lawsuit asked for a permanent injunction against the alleged wrongdoing and for "restitution for all illegal gambling proceeds" received by the defendants and/or the Internet gambling operations, including state taxes and fees.
Looksmart - as a result of a 2000 investment from BT they later wrote off - had significant cash reserves although many analysts question Looksmart's ability to survive the loss of their only significant client. The BT joint venture used tax havens - such as Barbados - in order to minimize taxes on the hoped for profit from a listing of the company. The use of tax havens is interesting given the founder Evan Thornley's stated interest in left-wing politics, evidenced by his purchase of loss-making, left-wing publisher Pluto Press Australia.
Some Looksmart critics say the company is run on very conservative lines demonstrated by the company's declaration in each of its annual reports that none of its employees are members of a labor union and that each employee was forced to sign individual fixed-term contracts (rather than collectively bargain as is preferred by labor unions). The employment of family members and friends of the Australian founders raised concerns of nepotism and favoritism. Geoff Ellery, the brother of founder Tracey Ellery was accused of harassment by a number of Looksmart staff members which was widely reported in the Australian press.
Microsoft's termination of its support for Looksmart caused speculation about the future of the company. Some shareholders were angry that the former Chief Executive Evan Thornley had allowed the company to become so dependent on one client. Some considered his public commentary in Australia about the inadequacies of Australian business to be amusing given this basic failure of sound business strategy.
Confronted by a very significant reduction in revenue, Looksmart sacked nearly half of their staff, tried to curtail other expenses, and sold its Australian business to Australian telecommunications giant Telstra for a token sum and closed all offshore operations. Its Chief Executive Jason Kellerman resigned, replaced on an interim basis by Evan Thornley's friend Australian Damian Smith.
With Looksmart challenged by rapidly declining revenue, lawsuits, layoffs, increased competition and staff morale issues, the Australian based and highly paid Chairman Evan Thornley agreed to resign in June 2004 and was replaced by Teresa Dial, a former CEO of Wells Fargo.
Greg Santora, a non-executive director and former Intuit CFO, resigned from Looksmart's board in August 2004. The company said he was resigning due to work commitments although observers noted he remained a non-executive director of two other publicly traded technology companies and had only resigned from Looksmart's board.
Damian Smith, Looksmart's interim CEO, said in an interview in August 2004 with MetrixMedia that rebuilding the company is a significant challenge. In the same interview, he said that Looksmart had allowed itself to become "hooked" on Microsoft's revenue stream which was 70% of its total revenue, had failed to keep costs down, and that Google has a better search product than Looksmart. Smith explained that Looksmart will offer a lower-price service to those who can't afford Google and Yahoo! According to Smith, maintaining a low-price discount service requires intense focus on cost structures. Critics observe this is very difficult for a company like Looksmart with a culture of lavish spending and long-term lease commitments which cannot be changed such as the $4M per annum lease on its San Francisco premises which runs until 2009.
Smith says that turning Looksmart around is "easy to say, hard to do." Many believe this to be due to the strategic mistakes made by his predecessor Evan Thornley.
This is an Article on LookSmart. Page Contains Information, Facts Details or Explanation Guide About LookSmart High Valuation in Technology Boom
Founders and Early Investors Cash Out Quickly
Internal divisions and Lawsuits
Effects of the Loss of Microsoft's Support
External links