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LookSmart Reports Third Quarter 2003 Results

Revenues of $40.3 Million Increase 70% Year-Over-Year;
Company Raises 2003 Earnings Guidance

SAN FRANCISCO, Oct. 28 /PRNewswire-FirstCall/ — LookSmart
(Nasdaq: LOOK; ASX: LOK), a global leader in search, today announced financial
results for the third quarter ended September 30, 2003.

Financial Highlights

Revenue Grows 70%: LookSmart reported third quarter 2003 revenue of $40.3
million, representing a 70% increase from $23.8 million in the third quarter
2002 and a 5% increase from the second quarter 2003.

GAAP Net Income Increases to $1.9 Million: LookSmart’s GAAP net income
was $1.9 million or $0.02 per diluted share for the quarter. This includes a
non-cash charge of $1.5 million as a result of the variable accounting for
repriced stock options. These results compare to a net loss of ($0.5) million
or ($0.00) per share for the third quarter 2002, which included a $0.1 million
charge due to variable accounting for repriced stock options.
"This quarter, we are introducing a new financial measure called Adjusted
Net Income/Loss, which equates to GAAP Net Income/Loss excluding the charge or
benefit due to stock compensation from variable stock options," said Bill
Lonergan, LookSmart’s chief financial officer. "We made this change to more
fully comply with the SEC’s Regulation on Pro Forma disclosures, and going
forward we will use this measure when discussing our financial outlook. As it
relates to our previously provided guidance, our earnings results for the
third quarter surpassed both our internal expectations and analyst consensus
estimates."

Adjusted Net Income Grows to $3.4 Million: LookSmart’s Adjusted Net
Income was $3.4 million or $0.03 per diluted share for the quarter. This
compares with an Adjusted Net Loss of ($0.7) million or ($0.01) per diluted
share in the year-ago period.
Adjusted Net Income/Loss is not in accordance with, or an alternative to,
GAAP financial measures and may be different from pro forma measures used by
other companies. The Company has provided a clear reconciliation between GAAP
Net Income and Adjusted Net Income and has presented the information
previously reported together with the financial statements attached to this
earnings release.

Paid Clicks Rise 87%: During the third quarter 2003, paid clicks grew to
224 million, up 87% from the third quarter 2002.

Distribution Costs: LookSmart’s average distribution costs were 54%, in
line with the Company’s target range of 53%-55%. Distribution costs are
expressed as a percentage of revenue.
"Revenues and earnings exceeded expectations during the third quarter and
LookSmart grew its cash position by just under $4 million, exiting September
with more than $61 million in cash and short-term investments," said Jason
Kellerman, LookSmart’s chief executive officer. "We are encouraged by our
early progress in converting customers to our recently launched Sponsored
Listings product, which taps the largest opportunity in paid search and
enables the management of both bid for placement and paid inclusion programs
from one integrated platform."
"We are finalizing our go-forward plan of operations as we look past the
conclusion of our MSN agreement in January 2004. LookSmart’s products,
technology and advertiser base provide us with a number of exciting
opportunities, and the management team and board of directors are working
closely to implement our plans. We expect to begin communicating our
strategic direction to employees and partners shortly, and we intend to
provide investors with a mid-quarter update on our plans," concluded Mr.
Kellerman.

Corporate Updates

LookSmart recently:

— Launched Sponsored Listings, the Company’s first bid-for-placement
search listings product, which enables advertisers to precisely target
their campaigns by bidding for the terms that are core to their
business. LookSmart is currently distributing Sponsored Listings across
a network that includes CNET, Road Runner, InfoSpace, LookSmart.com,
and Mamma.com.
— Announced that Microsoft will not renew its distribution and licensing
agreement with LookSmart. The companies agreed to extend the terms of
the current agreement through January 15, 2004, after which the
agreement will terminate.
— Named William Lonergan as chief financial officer. Mr. Lonergan, who
formerly served as chief financial officer of Tacit Knowledge Systems
and as a senior partner of KPMG, brings to LookSmart over 25 years of
senior financial management experience for both public and private
technology companies.

Business Outlook

LookSmart reiterated its fiscal 2003 revenue guidance of $147 to $152
million and raised its earnings outlook. The Company is raising its full-year
Adjusted Net Income guidance from $4 to $5 million, as previously expected, to
$8 to $9 million, excluding any restructuring charges. Distribution costs for
the year are expected to remain in the range of 53% to 55% (expressed as a
percentage of revenue).

For the fourth quarter 2003 LookSmart expects to report revenue of $38 to
$39 million and approximately $1.3 to $2.3 million of Adjusted Net Income.
The expected revenue decrease from the preceding quarter is primarily due to
implementation changes by Microsoft to its search results in the United
Kingdom.

This business outlook contains forward-looking statements describing
management’s current expectations for the future. These forward-looking
statements are subject to numerous assumptions, risks and uncertainties, some
of which are listed in the cautionary note below. As a result of these
uncertainties, the Company’s actual results in the future may differ
materially from management’s expectations. The guidance provided in this
press release is based on limited information available to the Company at this
time, and is subject to change. The Company does not provide all of its
guidance on a GAAP basis because information relating to the variable
accounting for repriced stock options is not accessible on a forward-looking
basis and its probable significance is not determinable. Although
management’s expectations may change after October 28, 2003, the Company
undertakes no obligation to revise or update these statements.

Use of Non-GAAP Financial Information

Management believes that Adjusted Net Income/Loss is an appropriate
measure of evaluating our operating performance because by excluding the
impact of variable stock compensation, which we believe is not indicative of
our core operating results, the users of the financial statements are provided
with a valuable insight into our operating results. Non-GAAP financial
measures should be considered in addition to, and not as a substitute for or
superior to, cash flow from operations, net income, or other measures of
financial performance prepared in accordance with generally accepted
accounting principles.

Conference Call

LookSmart will host a conference call today at 5:00 p.m. ET (9:00 a.m.
Australian ET, October 29, 2003) to discuss its financial results.
To listen to the call from the U.S., dial 1-800-240-4186; from Australia,
dial 1-800-730-220. A replay of the call will be available until Thursday,
October 30, 2003, 5:00 p.m. PT. To access the replay from the U.S., dial
1-877-289-8525 and enter passcode 556022#; from outside the U.S., dial
1-303-590-3000 and enter passcode 556022#.
The call will also be available live by webcast on LookSmart’s Investor
Relations Web site at http://www.shareholder.com/looksmart/ .

About LookSmart

LookSmart helps businesses of all sizes harness the power of search to
generate cost-effective sales leads. LookSmart search listings enable
businesses to reach Internet users through top portals and ISPs including
Microsoft’s MSN, Lycos, Road Runner, Cox Interactive Media, InfoSpace (Excite,
Dogpile, MetaCrawler, WebCrawler), CNET’s Search.com and search services such
as Inktomi. LookSmart is based in San Francisco, California, with offices in
New York, Los Angeles, Montreal, London, Tokyo, Melbourne and Sydney. For more
information, please visit http://www.LookSmart.com.

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