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AOL, LookSmart Harbinger Of Ad Weakness

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While Google’s shares skate above $700, troubling results at smaller online ad competitors hint at a turbulent future.

There wasn’t much good news for LookSmart, which disclosed its revenue had increased a meager 4 percent year over year for the third quarter. LookSmart revenue hit $12.6 million in the period.

AOL, LookSmart Harbinger Of Ad Weakness

Henry Blodget at Silicon Alley Insider sees some parallels between the end of the last dot-com era and what is happening with respect to LookSmart today:

When the Internet ad market cratered in 2000, the canaries in the coal mine were weak results from the 3rd-tier players. At the time, most analysts dismissed these problems as company specific. In fact, they were a sign that the Internet tide was no longer rising fast enough to lift all boats. The weakest ones sank first.

Followers of the Internet industry know what happened next. Everything came crashing down, jobs were lost, offices shuttered, websites turned dark. Not to mention the fate of high-flying stock prices for Internet companies, which hit the ground at terminal velocity.

LookSmart isn’t on the same level as AOL. Unlike LookSmart, AOL has a lucrative deal in place with Google for search and ads, while operating its Platform-A advertising services.

But wait, all is not well with AOL either.

Saul Hansell at the New York Times tied AOL’s declaration of continued downward pressure on ad revenues to AOL’s Advertising.com losing a major ad client. He identified that client as online educator University of Phoenix, a ubiquitous online advertiser that has purchase the Aptimus ad network.

There have been little tremors throughout online advertising, especially with the woes of the real estate market hammering lenders, and the ad spends they make in turn. Yahoo has noted them, in particular.

Is it a plastic teacup landing on a carpet in terms of impact on the online ad business, or the inescapable entropic nature of the universe exerting a cold grip on the heart of the industry? People will be watching the smaller ad players, certainly, but they will keep an eye on Google too.

AOL, LookSmart Harbinger Of Ad Weakness
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  • Tex

    Were you aware that Looksmart have $58 million in cash and are trading below that cash value of $2.44 per share?
    Are you also aware that they are predicting zero cash burn and a break even position by December 2007?

    Digg is rumored to be worth $300 million was what is Furl.net and wisenut.com worth?

    Looksmart may not have had the greatest quarter but they have certainly turned the corner after losing MSN as a major client.
    Webpro seems to look at the negative aspects rather than reporting the full story.