Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Looksmart and a Bleak Future for many Ad Networks?

Looksmart (with it's uniquely independent Award winning platform) have made it very clear that it sits in the middle of a large global ecosystem and will provide the ONLY cost effective Advertiser marketplace (enabled via an RTB based auction process, that's totally fair to publishers) and with 'reach' that can soon get to target users all over the web. [Re: Looksmart panics with Product Updates message?]

Hey (I wrote over on Yahoo Finance's LOOK board), don't believe me. - Check the Sept 10-Q yourself. Go to page 6 to see where the Co advises all:

< LookSmart operates in a large online search advertising ecosystem serving ads that target user queries on partner sites.

The Company operates in the middle of this ecosystem, acquiring search queries from a variety of sources and matching them with the keywords of its search advertising customers.

The Company’s search advertising network includes publishers and search advertising customers, including intermediaries and direct advertising customers and their agencies as well as self-service customers in the United States and certain other countries.>

But WHY the required 'silence' on LOOK, over the past 5 years or, more?

The reason can be best explained, as follows:

Let me remind all of the story of the corner store. - Where large suppliers would regularly deliver their products to daily, all over the world.

Those huge Co's soon realised that there would be better efficiencies (and much higher profits) for them to build huge shopping complexes and have 'the people' then, come in droves to them. Volume (alone), invited discounted pricing. - The 'corner store' soon, quickly became a 'horse and buggy type' business.

To help propagate the 'message' on the power of advertising on the web (after-all, it was clear that people were spending some 30% of their leisure time or, more? - on the internet) and that it made sense that businesses throughout the world should/could get to reach their target audience more effectively, the business of Ad Networks was then established throughout the world.

The role that they (those Ad Networks) are playing is not dissimilar to that 'corner store'. They (Ad Networks) have a stack of representation 'knocking on doors' & can/do provide a marketplace of both (between), their advertisers and publisher partners. For them to come and 'trade' (inventory for ads, for a price) and they do so.

They (the Ad Networks) then take a substantial sum of the payment made by the advertiser (as the 'go-between'), in providing both parties such services. Publishers receive what then remains after deductions.

One of the problems with this is that large global brands (like old time deliveries to local stores), may have to 'engage' many or, even ALL of these 650 odd Ad Networks for them to reach their (a desired), global audience. This means plenty of both time and staffing expenses, to do so. It became clear, that things had to change.

High volume Exchanges and DSPs buying direct plus publisher acessing exchanges 'direct' (avoiding Ad Networks), was the new & is to become more effective way for advertisers to connect with an audience.

Already consolidation of/among the bigger networks is happening on a regular basis and will continue. - Ultimately, survival (for Ad Networks) will ONLY be for the fittests and strongest that get to remain.

But it's also clear to me (or, should be, for them by now), that IF the majority of those Ad Networks were or, had of been aware of the radical changes ahead, they would not have established their 'corner store' type businesses in the 1st place. - I feel that soon, many will be doomed as viable businesses, and left to close their doors.

Many Ad Network involve-ee's are STILL yet to find out for themselves, if the comments here are any indication or, mean anything.

A good number of smaller Ad Networks will see all of their 'hard-earned' established customers (eventually) all going to the 'supermarket' type "Exchanges" to access more cheaper prices and for them to enjoy the larger scaled services on offer. - Because THAT is where the global brands will be 'delivering' their (more efficient) ad spends.  So it's pretty clear (or, should be), that more of the larger type publishers will then 'line-up' in the Exchanges. To be able to serve (that never-ending 'one stop shop'), inventory to those global brands (and others), vying for targeted users at scale.

Some larger publisher will take their inventory 'in-house' and go directly onto Exchanges (just as many DSP's will do so) with use of Looksmart's API 'connectors' or, part of those publisher/advertiser "solutions", is what they (Looksmart) like to term it.

Known publishers indicating their doing so, may include NBC Universal, Time Inc and IDG, for starters. (Try Facebook, too .. UHMmm?)

Looksmart (in selling off its own consumer sites) is (has been for a number of years now) a fully (and transparent) 'independent' operator and it's platform was built to global scale (it's not surprising that 33% of it Q3 2010 revenues came from Europe, the Middle East & Africa alone!) and the building of this type scale for the Looksmart platform was (as we know), aided by Microsoft and others. (A virtual 'replica' or, same - of Microsoft's own 'adCenter', is my reckoning)

To achieve scale across the whole/entire web (and be virtually able to then 'reach' all users), Exchanges will soon have a need to come together (to then get to 'interact' between each other) & to do so, they will require AN INDEPENDENT OPERATOR for this to happen.

An "inter-operator" being one that favours neither themselves or, the (advertiser or, the publisher) "side" nor, any of the many Media Co's that as DSP's (demand side platforms - buying inventory), that will be doing the business in 'trading' across the many Exchanges, that will make-up the total marketplace.

This then 'cuts-out' the 'middle-man' Ad Network (in the providing of a more efficient means and now having a more direct path) and with Looksmart then only taking a 'fraction' of the costs compared to that - which Ad Networks currently charge, it's plain to see why and what happens from then on, for Ad Networks.

Looksmart (during this drawn-out 'building' process, over the past number of years) have had to remain as 'stealthy' as has been at all possible and have done a pretty good job to date, as the current low share-price value would indicate. Much to the ire of many share-holders.

The moral 'issues' along the way? You be the judge as to the fairness of it all. Because, without those Ad Networks/the corner stores (and the many herds of 'foot-soldiers' out there on the 'front-line' - spreading the news - 'selling the gospel') in the 1st place, the 'show' would never of have gotten, even this far.

And like the Supermarkets have done (in their wiping out the corner stores), the combining of Exchanges (located across the web - along with the obvious cost savings that this will then provide - with those efficiencies), will do like-wise, with many ill-fated Ad Networks falling by the way-side. - (Why buy them when many of their customers will quickly gravitate to a larger establishment with 'self-serve' or, those publishers big enough [as is shown in that above link], and will go directly onto an exchange managed by Looksmart?)

Long term readers of the LOOK board on Yahoo Finance will now (maybe?) get to understand the main reason why my posts have been ruthlessly CENSORED for years there and on (at least) five other sites, that I had once posted my own opinion to.

Looksmart (with a Market Cap of $26.17M) is now valued less than it's "cash" of $26.8M, recorded end of Q3 20120. Go figure?

LOOK: 3:59PM EST: $1.52  Down 0.09 (-5.59%)


Disclosure: Long LOOK and happy to be so...