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LookSmart Ltd. Reports Operating Results (10-Q)

August 04, 2009 | About:

LookSmart Ltd. (NASDAQ:LOOK) filed Quarterly Report for the period ended 2009-06-30.

LookSmart is a global Internet search infrastructure company. LookSmart creates highly targeted online marketing products for its customers by matching the users\' need for relevant search results with the onlinemarketer\'s need for effective targeting. LookSmart creates a range ofdirectory listings and search targeted advertising products that aredistributed through its search infrastructure platform through leadingInternet portals ISPs and media companies. LookSmart Ltd. has a market cap of $21 million; its shares were traded at around $1.23 with and P/S ratio of 0.3.

Highlight of Business Operations:

As of June 30, 2009, purchased technology of $0.3 million was impaired by approximately $0.2 million because an associated initiative was discontinued. Any adjustment to the estimated impairment based on additional information providing a more accurate measurement will be recognized in subsequent reporting periods.

We continue to be dependent upon a few customers for a significant percentage of our revenue. For the three months ended June 30, 2009 and 2008, two customers accounted for a combined 28% of revenue. For the six months ended June 30, 2009 and 2008, those same two customers accounted for a combined 29% and 30%, respectively. One of these two customers, IAC Search and Media (IAC), notified us in May 2009 that it does not intend to renew the May 2005 AdCenter License, Hosting and Support Agreement, which provides for certain Publisher Solutions services when it expires on December 31, 2009. For the three and six months ended June 30, 2009, IAC accounted for $1.0 million and 2.1 million, or 79% and 84%, respectively, of Publisher Solutions Revenue. Advertiser Network revenue derived from IAC, which is covered under separate distribution agreements, totaled $1.3 million and $2.9 million for the three and six months ended June 30, 2009. IAC has not indicated to us an intent to terminate these separate distribution agreements.

We recognized Advertiser Networks revenue of $12.0 million and $24.0 million, respectively, during the three and six months ended June 30, 2009, down 24% from the $15.7 million and $31.5 million, respectively, recognized during the three and six months ended June 30, 2008. Revenue from Advertiser Networks decreased in the second quarter of 2009 by $3.7 million and $7.5 million in the first half of 2009 compared to the same respective periods in 2008.

The Advertiser Network saw growth in total paid clicks for both the three and the six months ended June 30, 2009. Total paid clicks for the three months ending June 30, 2009 increased 6% to 207 million, compared to 195 million for the second quarter of 2008. During the same period, average RPC decreased from $0.08 to $0.06 compared to the previous years quarter. Total paid clicks totaled 391 million for the six months ended June 30, 2009, compared to 347 million for the same period of 2008. The 13% increase in paid clicks was offset by a decrease in revenue per click from $0.09 to $0.06 over the same time period.

We recognized Publisher Solutions revenue of $1.2 million during the three months ended June 30, 2009, a 10% decrease from the $1.4 million recognized during the three months ended June 30, 2008. IAC represented $1.0 million, or 79%, of Publisher Solutions revenue during the three months ended June 30, 2009. For the six months ended June 30, 2008, we recognized $2.5 million of Publisher Solutions revenue, a decrease of 21%, or approximately $0.6 million, from the $3.1 million recognized in the same period of the prior year. IAC represented $2.1 million, or 84%, of Publisher Solutions revenue for the six months ended June 30, 2009. Publisher Solutions revenue decreases for the three and six months ended June 30, 2009 as compared to the same periods in 2008 are primarily attributed to reduced revenue from IAC resulting from a contractual reduction of the revenue share percentage in the final year of the contract.

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