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LookSmart, Ltd. Settles "Pay-Per-Click" Internet Ad Action with Customers for $1.8 Million

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Case ID: 2742 | Technology | 09/30/2003

The parties have reached a tentative settlement, apparently valued at $1.8 million, in two related class actions filed against online marketing service LookSmart, Ltd. on behalf of LookSmart customers who purchased a listing from the company between May 13, 1998, and April 9, 2002. The customers allege that they agreed to a contract that included a one-time payment to LookSmart for listing services, only to find that the company, in violation of their contracts and California business laws, unilaterally changed their accounts so that they were required to make additional payments. Claim forms must be submitted online on or before November 14, 2003, to be considered valid.

The actions allege that LookSmart advertised that for the one-time payment it would list customers' web sites in the database indefinitely. In April 2002, the company began requiring customers to begin to "pay-per-click" pursuant to a new program.

Beginning in July 2002, LookSmart began extending 100 free clicks per month to eligible settlement participants, and committed to providing the 100 free clicks per month through December 11, 2003. LookSmart acknowledges that this class action served as a catalyst in its decision to provide the free clicks to eligible settlement participants.

Free Clicks Available [heading]

All subscribers whose listings were added to the LookSmart directory database between May 13, 1998, and April 9, 2002, and whose listing continued to be included in the database as of September 5, 2003, are considered "eligible current customers." This group of subscribers will automatically receive 100 free "clicks" per month through December 11, 2003, or whenever their listings terminate, whichever is earlier. There is no need to submit a claim to receive these free clicks.

All subscribers whose listings were added to the LookSmart directory database between October 9, 2001, and April 9, 2002, will automatically receive 75 free "clicks" per listing per month beginning December 12, 2003, and ending June 12, 2004, unless their listing is terminated prior to June 12, 2004. The 75 free clicks are in addition to the 100 free clicks described above. There is no need to submit a claim to receive these free clicks.

All subscribers whose listings were added to the LookSmart directory database between April 9, 2001, and October 8, 2001, will automatically receive 50 free "clicks" per listing per month beginning December 12, 2003, and ending June 12, 2004, unless their listing is terminated prior to June 12, 2004. The 50 free clicks are in addition to the 100 free clicks described above. There is no need to submit a claim to receive these free clicks.

All subscribers whose listings were added to the LookSmart directory database between May 13, 1998, and April 8, 2001, will receive only the free clicks described above.

None of the free clicks outlined above are transferable. Unused free clicks will not carry over from month to month. If a subscribers has terminated a listing prior to the date of any final judgment in the action, or terminates a listing prior to June 12, 2004, LookSmart assumes no obligation to pay the customer the value of unused free clicks, if any, as of the date the listing is terminated. None of the free clicks offered constitute a guarantee by LookSmart of traffic generation for eligible customer listings sufficient to utilize the free clicks, and LookSmart assumes no obligation to generate such traffic.

Detailed Class Definition [heading]

Eligible former customers are those subscribers (1) whose listings were added to the LookSmart directory database between May 13, 1998, and April 9, 2002; (2) whose listing was included in LookSmart's directory database on April 9, 2002, and whose listings were, after April 9, 2002, but before September 5, 2003, cancelled by specific choice of the subscriber by use of the cancel listing feature of the Advertiser Center or through contact with LookSmart's customer service; (3) whose listings were not cancelled because of a violation of LookSmart's policies, editorial guidelines, or due to any violation of LookSmart's terms and conditions (except as disputed in this litigation); (4) who, as of the date of any final judgment in the action, are the rightful owner of the URL associated with the listing; and (5) whose listing, as of the date of any final judgment in the action, is not part of the LookSmart directory.

Eligible former customers who submit a timely claim form will receive an individual cash payment of up to $50. A $250,000 fund has been established for payment of these claims. If the total amount of claims exceed $250,000, each individual former customer will receive a pro rata share of the fund.

The settlement will not be effective until the court grants it final approval. The court has scheduled a hearing on the matter for October 31, 2003.


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