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October 15, 2003
MSN Canceling LookSmart Contract
In what LookSmart critics may see as poetic justice, LookSmart's stock fell 50% October 7th, 2003. This did not follow the proposed lawsuit settlement. Instead, it came after an announcement that MSN would not be renewing their contract with LookSmart after January 15, 2004. MSN currently carries LookSmart's listings and accounts for a hefty 65% of its revenues. MSN also serves results from Inktomi, now owned by Yahoo.
According to a US Bancorp analyst in a recent CNET news article, the contract cancellation was most likely due to Microsoft's recent desire to build a new crawler-based search engine to compete against Google.
LookSmart's substantial drop in stock price may now make it a more desirable acquisition target. While Microsoft may try to build everything from scratch, I still wouldn't rule them out from making a later bid to acquire LookSmart if their stock continues to tumble in price. If they don't, they may have to build both a new crawler-based engine and some kind of paid placement or paid inclusion engine from scratch.
MSNBot will not likely be ready for prime time by January since they just started development in earnest this summer. Playing catch up to Google will take time. Assuming MSN has nothing to replace LookSmart with come January 15th, then existing Inktomi results could play a more dominant role on MSN, at least until MSNBot is completed. It's also possible that MSN could strike a deal to carry some Overture results after the LookSmart deal expires.
CNET NEWS: LookSmart shares drop on MSN News
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