LOOKs Can Be Deceiving

You may have heard that Looksmart have made some changes to their business model lately. In fact, Looksmart have made the profit-driven decision to move from a Paid Submission based directory to a Pay Per Click based directory.

The first warning shot was fired on April 3rd, with an email to existing Looksmart customers announcing the impending launch of Small Business Listings:

“Based on feedback from customers like you, we’ve merged and enhanced the benefits of our ‘Submit’ and ‘Site Promote’ products into one product called Small Business Listings.”

Hmm… we thought, smells like pay per click. Discussion boards and forums worldwide were rife with rumours, complaints and concerns. Feedback? What feedback? Nobody put their hand up to say they had asked for a PPC model.

Next came machine gun fire in the form of an email sent to existing Looksmart customers on April 12th:

“LookSmart has launched Small Business Listings, our first pay-per-click product for small businesses. This new, improved product replaces both Submit and Site Promote… Your account has already been updated and is ready for you to log in. We've waived the $49 per listing set-up fee. We'll give you $300 in free clicks per listing. Each month for the next 20 months you'll receive a $15 credit per listing in your account – starting today.”

Meanwhile, new customers were asked to pay a $49 “set-up” fee and an initial account deposit of at least $150 towards future clicks. Existing Express Submit customers who paid the $199 or $299 one-time submission fee discovered they were only entitled to a maximum of 100 clicks per month instead of the unlimited number of clicks they were receiving under the old model. Ouch. What’s more, Looksmart demanded that these customers log-in and “activate” their accounts by July 11th (by entering their credit card details) in order to receive their “free” clicks.

All types of conflicting assumptions and questions began appearing on the forums and discussion boards. “What happens if I don’t activate my account?”, “Will existing listings stay the same if you do nothing?”, “Will my site be dropped if I don’t activate”, “What happens to my Looksmart listings on MSN?”. So confusing and misleading was the announcement from Looksmart that some people thought they were getting a huge bargain while others believed they were getting ripped off big time. To make matters worse, the Terms of Service and FAQ’s for the new Small Business Listings on the Looksmart site seemed to show conflicting information that changed each day we looked.

But it took a couple of days for the true deception to sink in. Once people began to log in and activate their accounts, it wasn’t long before they started receiving “Listing Traffic Interruption” emails from Looksmart announcing their sites had already received the 100 “free” clicks allocated as part of the new deal and would consequently receive no more traffic for that month, unless they increased their monthly budget (in other words, agree to pay $0.15 per click for all additional visitors that month). One of my colleagues received this email within 8 hours of activating his account, which meant that he was previously receiving more than 300 clicks per DAY, let alone the oh so generous 100 clicks per month that Looksmart were offering him as part of the new deal. He worked out that he would need to add an additional $1,300 to his account each month, just to maintain the level of traffic Looksmart were providing him under the old system! Upgrade? I think not!

Here are some interesting tid-bits I’ve discovered about the new model:

• Unlike regular Pay Per Click models such as Overture.com, Looksmart are not giving customers control over their bid amounts and also providing no way to regularly update their listing description without paying $49 each time for the privilege.

• Sites previously receiving an unlimited number of clicks per year via the old system are now restricted to 1,200 clicks per year, unless they fork over more money.

• The new system has a $15 per month minimum spend requirement. This means that if a listing fails to generate $15 worth of click revenue for LookSmart in a particular month, the site will still be billed for that entire amount

• Wording used in Looksmart’s announcement emails seems to deliberately mislead customers into believing their directory listings are going to disappear if they do nothing. The fact is that the listings may or may not be removed – depending on how “essential” the site is deemed to be by Looksmart Editors.

• Sites previously ranking well via their existing listings will, in all likelihood, lose these rankings whether they activate their PPC account or not, because preference will now be given to those who buy “relevancy keywords” as part of their listing.

• By their own admission, Looksmart is unlikely to delist big brand sites, even if they refuse to pay for the new scheme, because they are “critical to relevance”.

• Looksmart claims the new program creates a lower cost of entry for small business whereas the start up costs actually come in at $50 more than the old Basic Submit model used by those with smaller budgets, not to mention the additional click costs.

• Apparently, LookSmart have been trying to force companies whose sites were included in the directory for free to convert to their paid programs. Looksmart’s attitude to these sites is “having a free ride doesn’t help the business model” and if they don’t convert, they are likely to be removed.

• Under the old submission programs, a single web site could submit up to five different URLs. The new program institutes a one URL per site limit, dramatically reducing the ability to target and direct traffic to the most relevant areas of your site.

• Many people who have activated their accounts and already received notification that their “free” clicks are used up are checking their logs and finding discrepancies between the number of clicks Looksmart say they have provided and the number of actual clicks to their site.

• Looksmart had the audacity to call this new model an “upgrade” for existing clients, when in fact it reduces the value of their listing incredibly.

• According to industry leader Danny Sullivan, in the past few days, LookSmart has been automatically migrating accounts to the new system regardless of whether customers give their permission by manually “activating”.

Being an SEO, I have multiple Looksmart accounts for my own sites and those of my clients. I’ve already received six “Listing Traffic Interruption” emails. But I won’t be giving them another cent. Why? Because Looksmart no longer offers me or my clients value for money, for one thing. But more importantly, the deceptive nature of their announcement and their decision to force existing customers to roll-over into the new system instead of “grandfathering” their listings demonstrates to me a complete lack of understanding of their own market.

To put profits before customers might bring some short-term shareholder joy, but it will also guarantee a growing exodus of disappointed clients and users as they find more cost-effective and relevant search alternatives. In my book that’s search engine suicide.

Search engines and directories have done some pretty shifty things over the years, but never before have I seen such arrogance or disdain for customers as Looksmart have shown in the past two weeks. A post at the Web Master World search engine forums sums it up nicely:

“L$ is like the mob and they just busted my kneecaps…”

In fact this whole episode reeks of desperation, profiteering and deception on such a grand scale, you have to wonder if they are in serious financial muck. Whatever their motivations, it looks like they’ve already pressed the self-destruct button.

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April 22, 2002