LookSmart cut 31 percent of its staff, laying off 172 employees. It lowered expected fourth-quarter revenue to between $30 million and $31 million, down from prior estimates of between $33 million and $36 million.
The company now expects a loss for the quarter of 14 cents or 15 cents per share. Analysts had expected a loss of 12 cents per share, according to First Call.
LookSmart will report earnings Jan. 25.
In addition to the layoffs, the company will quit non-core businesses, consolidating 11 operating groups into four. LookSmart said it expects to save $44 million on an annual basis and will take a one-time charge this quarter.
The company, which provides directory listings to sites and companies including Microsoft's MSN, Netscape Netcenter, AltaVista, Excite@Home, Time Warner, Sony and Qwest Communications International, said it was surprised not by the worsening advertising climate but by the severity of the storm.
"Untargeted advertising is declining, while highly targeted online direct marketing is growing rapidly," Evan Thornley, LookSmart's chief executive, said in a statement. "However, in the fourth quarter, the parts of our business that were weakening did so faster and to a greater degree than expected."
Thornley identified one bright spot in the gloom, saying that sales of "highly targeted" listings grew more than 40 percent over the previous quarter.