Microsoft Looks Smarter

Putting most of your eggs in one basket can get you scrambled, especially if that basket happens to be Microsoft (Nasdaq: MSFT  ) . Last night the software giant announced that it has decided not to renew its sponsored search contract with LookSmart (Nasdaq: LOOK  ) when it comes up in January.

While LookSmart will still provide paid text ads to popular online destinations like About.com and Terra's (Nasdaq: TRLY  ) Lycos search engine, losing Mr. Softy is a real heartbreaker. Microsoft made up roughly two-thirds of LookSmart's listing revenue.

At least LookSmart was honest about its situation. Over the summer, in its 10Q filing, the company revealed that Microsoft was testing out alternatives to LookSmart's services.

Contextual advertising, in which targeted text ads are sold and then displayed on relevant search result pages and content sites, is big business. It's so meaty that Yahoo! (Nasdaq: YHOO  ) decided to acquire its contract provider, Overture (Nasdaq: OVER  ) .

Because of Microsoft's monopolistic tendencies (and whether that is deliberate or simply because quality wins in the free market is a debate for another day), it will be interesting to see if Microsoft goes with a rival provider or simply develops an in-house solution.

As far as business models go, you've got to love sponsored searches. The advertiser wins because it reaches the appropriate audience. The site displaying the ad comes out ahead as it reaps the fruit of significant yet unobtrusive marketing that will ultimately kill the dreaded pop-ups once and for all.

That's why even a small fry like LookSmart was able to land ad money from the likes of Wal-Mart (NYSE: WMT  ) , FedEx (NYSE: FDX  ) and Bank of America (NYSE: BAC  ) -- along with tens of thousands of small companies just looking to get noticed online.

Sponsored searches work. Ironically enough, LookSmart's success is why its days are numbered with Microsoft. Yes, you can be too good for your own good. You can even look too smart -- if you're LookSmart.

Is Microsoft right to pull the plug on its relationship with LookSmart? What do you think of sponsored text ads? Too much? A better alternative than pop-up and banner ads? All this and more -- in theMicrosoft discussion board. Only on Fool.com.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 499405, ~/Articles/ArticleHandler.aspx, 9/22/2014 6:27:34 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement