Yet again, it has been a tough year for shareholders of online advertising company LookSmart
According to third-quarter earnings released last week, revenues increased 33% to $12.2 million and the net loss fell from $4.3 million, or $0.19 per share, to $3.9 million, or $0.17 per share. Revenues grew a healthy 9% compared with the second quarter, which was above management's guidance of 6% to 8%. There was also an increase in gross margins.
LookSmart consists of three segments. First, the company has an advertising network where advertisers can use its platform to target their ads to certain demographics or categories.
Next, LookSmart sells its advertising technologies to publishers such as traditional media companies, as well as online content players. This helps publishers grow their audiences, provide metrics to advertisers, and of course, increase the money they make, such as by allowing for pay-per-click options.
All of this is particularly attractive to content companies, especially those that fear the increasing power of Yahoo!
The last segment is LookSmart's own content sites -- more than 180 of them. These are focused on particular subjects such as sports, money, and so on.
Interestingly enough, all segments are showing strength (according to those on the third-quarter conference call) and the growth is expected to continue through the fourth quarter. The guidance is for revenue to grow 26% to 28% from the third quarter, and gross margins are forecasted at 40% to 41%.
Despite the positive signs, the key question is: Might this really be a temporary thing?
Perhaps. But the company has spent two years restructuring its operations: improving the sales force, rationalizing the cost structure, and building a strong product line. And given the dollars that continue to move into online advertising, LookSmart is positioned to finally start benefiting.
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