Looksmart is a directory developed by editors. In that way, it is seen as the antithesis of Google which used algorithms to determine the relevancy of searches. In recent years it has relied on the hard work of thousands of volunteers in building up the associated Zeal directory. Critics of Zeal argue that DMOZ is a more democratic version of a volunteer produced directory. Critics of DMOZ make the same argument in reverse. Looksmart points to the role of certain extremists in determining the content of DMOZ.

Having failed to build a retail brand of significance, Looksmart devised an approach of selling its web directory to portals much more successful than it.

In that time, some of the founders and senior executives made tens of millions of dollars selling what most thought to be its overpriced stock even though the accumulated losses of the company approached one hundred and sixty million dollars.

However, Looksmart built its strategy around the revenue and support of one client, Microsoft, failing to diversify. In 2003 Microsoft announced its support would be withdrawn, resulting in a loss of as much as 90% of Looksmart's revenue. LookSmart says it's nearer 60%, although that fails to include the expected collapse in revenue from those who advertised on Looksmart as a cheap way onto MSN's site. Those advertisers are now going directly through MSN.

Prior to that, the founders Australians Evan Thornley and Tracey Ellery had resisted a palace coup on the board from independent directors unhappy the husband and wife team intended to remain on the board. The independent directors resigned in protest at what they saw as inappropriate corporate governance. They were also concerned about class action lawsuits from Looksmart's once loyal customer base alleging fraud and other lawsuits from Looksmart's shareholders against analysts who had advised the purchase of Looksmart stock which fell from $80 a share in 2000 to as low as $1 in 2002.

The fraud suits against Looksmart were finally settled for $400,000 with Looksmart's legal bills topping $700,000.

Looksmart - as a result of a 2000 investment from BT they later wrote off - had significant cash reserves. Although many analysts question Looksmart's ability to survive the loss of their only significant client. The joint venture used tax havens - such as Barbados - in order to minimise taxes on the hoped for profit from a listing of the company.

Looksmart is regarded by most financial markets observers as likely to be acquired at near cash value or to collapse following the loss of Microsoft's support. Some shareholders questioned how Evan Thornley had allowed it to become so dependent on one client.

The company has recently sold its Australian business to Australian telecommunications giant Telstra for a token sum and is closing most offshore operations. Its Chief Executive Jason Kellerman resigned, replaced by Evan Thornley's friend Australian Damian Smith.

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