LookSmart to Close UK Operations

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As it prepares for life after Microsoft, search company LookSmart told its United Kingdom advertisers yesterday that it would cease operations there next month.

The move comes as LookSmart copes with the impending loss of its key distribution deal with Microsoft, whose MSN site carried LookSmart's paid inclusion listings. In total, Microsoft accounted for about two thirds of LookSmart's business. Their partnership will end on Jan. 15. LookSmart UK, whose customers mostly relied on it for listings on MSN UK, will cease operations the same day.

"Following MSN's decision to end their relationship with LookSmart as of 15th January 2004, we have reached the conclusion that we will be unable to operate profitably in Europe next year," the company said in an e-mail.

LookSmart entered the UK in February 2000 in a joint venture with British telecom giant BT. Last December, it bought out BT to operate the paid inclusion service itself. The company said it would shut down its UK office early next year. LookSmart still has operations in Canada, Japan and Australia. LookSmart said its other international operations would not be affected.

The move to end its UK operations comes as LookSmart embarks on an overhaul of its business to account for Microsoft's decision to remove LookSmart's paid inclusion listings, in which advertisers pay to have their sites included in a database of sites crawled, from its directory layer of search results. Microsoft said it made the decision based on relevancy testing it did this fall on MSN UK's search site. Microsoft has invested heavily in building its own search technology to compete with Google and Yahoo.

Separately, LookSmart announced that it added distribution partners for its new paid search network. SearchFeed, myGeek and ABCSearch join existing LookSmart paid search partners like CNET, Road Runner, InfoSpace and Mama.com. San Francisco-based LookSmart competes with established paid listings companies like Yahoo's Overture Services, Google and FindWhat.com.

LookSmart unveiled its paid search product on Oct. 2, just days before it announced that Microsoft would not renew its paid inclusion deal. The company hopes its foray into paid search, along with deals like its recent agreement to power BellSouth's paid inclusion offering, will partly offset the loss.


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