MSN dealt a predictable, yet massive blow to the Australian search directory LookSmart yesterday with the announcement that MSN search will not renew an agreement to display results from the LookSmart directory. The current agreement which ends in mid January 2004, is LookSmart’s largest revenue stream, accounting for over 65% of the already beleaguered company’s $140Million annual income. LookSmart, which recently announced a move towards the paid-contextual advertising market, will almost certainly be fatally damaged by this move with LookSmart shares down 52 percent at $1.44 by the close of trading yesterday. Investors fled the company so quickly that trading on LookSmart’s stocks was closed shortly after the announcement.

Our analysis: MSN has dropped LookSmart for three main reasons:

1) First of all, LookSmart was entering the paid, contextual advertising sector, a market MSN wishes to dominate in the coming years. The last thing MSN needs is another rival to contend with on top of Yahoo and Google. By dropping LookSmart at this time, MSN is effectively consolidating its competition by eliminating the smallest.

2) Secondly, MSN doesn’t need to draw results LookSmart as it can now compile its own results from a mixture of Inktomi listings and sites spidered by the new MSNBot.

3) Thirdly, Microsoft needs to dominate the multi-billion dollar search market as its traditional markets are either flattening or shrinking as Linux romances the desktop market and Apple’s Unix driven Mac OS X continues it’s drive into the micro-product market. Microsoft’s signature product, Windows has proven to be a constant security risk as viruses and worms continue to penetrate and MS continues to issue patches, leading many IT decision makers towards UNIX and Linux based systems.

Microsoft is clearly aiming to take paid-advertising market share away from current industry leader Google and second runner Yahoo (Overture) however the imminent demise of LookSmart might actually come back to haunt MSN in a few months as LookSmart may have just become a more attractive take-over target for Google or Yahoo. LookSmart’s technology is sound and its newly announced paid-placement business model could generate revenues if LookSmart has learned to treat its customers with greater respect than they have in the past. While Yahoo has already been on a purchasing spree this year with the acquisition of AltaVista, AlltheWeb and Inktomi, Google has yet to take over another major search player, instead targeting smaller companies who’s technology could improve their current product.

Whatever happens to LookSmart in the coming months, MSN’s move has definitely moved the goalposts on the search engine playing field and escalated the business war between the big-three.

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Thursday, October 9th, 2003

Google and AOL Renew Listings Deal

Google and AOL announced a continuation of their multi-year deal. Google will continue to feed results to the AOL search tool and other AOL properties such as Netscape and Compuserve as well as continuing to power web search results for AOL sites in the United States, the United Kingdom, France, Germany, the Netherlands, Brazil, Mexico, Argentina, Japan, Australia and Canada. Google will also continue to provide paid listings through AdWords to sites in the US, Japan and Canada. AOL Europe will continue to receive paid listings from Overture. AOL is betting that they will retain users by sticking with Google, the web’s most popular search brand rather than lose viewers to Google itself.

Yahoo! is ready to post its third quarter earnings report and stock analysts believe they will show their sixth consecutive profitable quarter (ending Sept. 30, 2003) with earnings above nine cents per share on revenues of $335.7 million. Analysts are already predicting a very strong fourth quarter for Yahoo with First Albany’s Youssef Squali, stating he expects to see Yahoo’s total search revenues jump by over 140% from last year’s numbers. This sudden rise is credited to the relationship between Yahoo and Overture, which is being purchased by Yahoo in the next few months. In Yahoo’s third quarter, Overture accounted for over 20% of Yahoo’s revenues. Yahoo watchers should keep their eyes on MSN in the coming months as MSN is expected to drop Overture search results in the near future in favor of their own paid-placement program which is expected to be announced early in the new year.

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Wednesday, October 1st, 2003

Google & Lycos Make AdSense

In a wise move, Google has outflanked its main competitor Overture by signing a deal with TerraLycos to display AdWords on several of TerraLycos’s US Internet properties such as Tripod, Angelfire, HotWired, Lycos.com, Matchmaker, and Raging Bull. TerraLycos joins other Internet heavyweights, iVillage, Weather.com and Switchboard as carriers of the AdSense program that allows websites to display AdWords advertisements on their sites. Thousands of smaller webmasters and media outlets also display AdWords ads through the AdSense program. TerraLycos (US) saw over 31 million visitors last year throughout its network of portals and sites.

Commission Junction is one of the largest distributors of banner ads, web rings and other mass-marketing tools in the lucrative affiliate marketing sector. Now, with the advent of Contextual Advertising, rumour has it Commission Junction is looking to move into the personalized delivery of advertising field. With both Google and Overture delivering contextual advertising across a huge number of websites, what happens to the market if a massive player like Commission Junction moves into the game?

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Wednesday, October 1st, 2003

PageRank is Sick… Is Google Broken?

For the past six months we have been telling clients that something very strange is happening with Google. From the way they have measured back links to the amount of SPAM that has appeared in the Top10, Google has not performed to its previous standard of excellence for almost a year. Now, with the intensity of public scrutiny surrounding Google heating up, folks are beginning to talk about Google’s problems as well as IPO rumours and its near monopolistic hold on the business of search. Read more…

One of the oldest search tools on the web has recently introduced a sleazy marketing campaign targeting other search engine’s clients. Lycos, owned by Madrid based TerraLycos, is using GATOR advertising to display advertisments for their free email system when users (who’ve either downloaded or been infected with GATOR software) go to competitor’s sites. Read more…

A great deal of information is leaking out of Redmond Washington this week as Microsoft’s spin-masters start the process of promoting the new search tool that will be incorporated in the new version of the Windows operating system currently code named, “Longhorn”. The new OS will blur the division between a computer’s hard-drive and the general Internet. The goal is to create the ultimate search tool, though with the number of features and tools being spoken of this week, it looks much like a Swiss-Army knife compared to the butter knife MSN currently provides. Read more…

Last Monday I received an Email from the Wall St. Journal. Since this is something that doesn’t happen every day, and, since the WSJ has already run the article with a quote from our correspondence, I thought it would be nice to share the email exchange with the world. :)

Read more…

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Wednesday, September 24th, 2003

IBM Enters the Fray

There was just too much news for our little ol’ newsletter this week. We really wanted to include this item but space was limited and the story is still in development. Here’s a hint for next week though:

IBM announced last week that its enterprise search engine, WEBFOUNTAIN is almost ready. Webfountain will be used by by businesses to find and contextualize information from anywhere within a corporate or business intranet. The most advanced feature is the contextualization of information, (not to be confused with contextual advertising), that will provide a user with definitions of industry specific terms and phrases as well as finding documents on similar topics for extra research. For more information on Webfountain, please visit the IBM Almaden Research Center at www.almaden.ibm.com/WebFountain (link no longer active)