Not Finding Answers.com

I'm always leery of companies that report their quarterly results in thousands. Unless we're talking about a development-stage biotech, I begin to wonder why they're even public in the first place.

So when Answers.com (Nasdaq: ANSW  ) claims that "revenues were $2,991 thousand in Q4 2007," it's really just a fancy way to say that it couldn't crack $3 million on the top line. Answers isn't splitting hairs, but it is splitting thousands.

Another thing that Answers is splitting is answers. Company officials boast about how WikiAnswers.com -- the site Answers.com launched after the recent acquisition of FAQ Farm -- is on a growth tear. It is. However, it represents less than a quarter of the meager revenue mix here.

Answers.com is still the driver, but you'll have to dig up last year's quarterly report to confirm its moribund ways. The company's namesake site generated $2.27 million in revenue this past quarter, 8% less than the $2.46 million it scored in Answers.com ad revenue a year earlier.

It's at this point when you begin to wonder if the problem is with Answers.com or with its ad-serving partner, Google (Nasdaq: GOOG  ) .

Actually, Google is the problem, but not in a way that is negative to Google's AdSense program. The rub is that Answers.com relies on Google.com to derive "the vast majority" of its search engine traffic. As a resource site, Answers.com's reference pages typically rank well below those on niche-specific information sites like CNET (Nasdaq: CNET  ) , The Knot (Nasdaq: KNOT  ) , or the collection of sector-specific sites at Internet Brands (Nasdaq: INET  ) . Even Wikipedia entries rank well above any Answers.com entries. It will get even harder to stand out once Google expands its homegrown Knol alternative.

Things could have been different. Answers.com announced the acquisition of Lexico -- the parent of Dictionary.com, Thesaurus.com, and Reference.com -- last summer. The $100 million deal would have brought into the fold a collection of high-margin sites with a ton of natural Web traffic.

The rub is that Answers didn't have the money. It would have to turn to a secondary offering to raise the funds to seal the deal. When market conditions deteriorated, Answers canceled the stock offering last month. The deal is dead.

So where does that leave Answers? The company is looking to grow its top line aggressively in 2008. The optimism implies brisk strides at WikiAnswers.com, but can the company meet its $15 million to $18 million top-line target without a turnaround at Answers.com?

I am skeptical, especially given the plethora of new reference sites, such as 
like Knol, Citizendium, and Wikia, which is backed by Wikipedia's founder and 
by Amazon.com (Nasdaq: AMZN  ) .

We live in a world with too many answers. That, in turn, will create even more questions for Answers.com.


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