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Juno and LookSmart strike deal, shares gain

Juno Online Services (Nasdaq: JWEB), a provider of Web access and other Internet-related services, said Tuesday it has a deal with LookSmart (Nasdaq: LOOK), a search specialist, to provide the search function on its portal.

Under the deal, subscribers to Juno will have immediate access to LookSmart's Web directory with more than 1.8 million Web sites organized into 170,000 categories. LookSmart jumped 8 percent to 13 3/4 in early trading. Juno was up 9 percent to 7 19/32.

The partnership will generate millions of dollars in revenue for Juno, primarily in the form of search and directory referral fees, the companies said. The two money-losing companies need some help impressing investors. Both Juno and LookSmart are well below their 52-week highs.

LookSmart will generate revenue from both the directory and advertising sold on the search pages visited by Juno's subscribers. LookSmart's distribution network reaches more than 52 million unique users each month, or 74 percent of all Internet users in the United States. By adding Juno to its list of partners, LookSmart also gains access to Juno's users.

Juno announced a widened first quarter loss due to heavy customer acquisition costs.

The company also said it chose not to be profitable, since subscriber acquisition expenses are largely discretionary, and can be adjusted.

LookSmart topped estimates in its fourth quarter, but also reported a loss. The company sees hefty competition from the likes of Go2Net (Nasdaq: GNET), Lycos (Nasdaq: LCOS), and Yahoo! (Nasdaq: YHOO)

Juno's competitors include Internet Access Providers such as Earthlink (Nasdaq: ELNK) and portals such as America Online (NYSE: AOL).