The performance at LookSmart (NASDAQ: LOOK) hasn't been too smart over the years. Even though the company is in the red-hot online advertising sector, it still can't seem to get an edge against Google (NASDAQ: GOOG), Yahoo (NASDAQ: YHOO), and Microsoft (NASDAQ: MSFT).

For example, in yesterday's Q3 report, LookSmart posted a meager 4% increase in revenues to $12.6 million. There was also a GAAP net loss of $4.3 million, or $0.19 per share.

So, to get things on track, LookSmart is rationalizing things. That is, the company announced it has sold its FindArticles.com division to CNET (NASDAQ: CNET) for $20.1 million in cash.

FindArticles.com is a niche asset, with an archive of 11 million articles from more than 3,000 sources. And, for the most part, it looks like a fit for CNET. Expect other content deals from the company.

However, as for LookSmart, it still has a lot of challenges. The company slashed 25% of its workforce and isn't providing any revenue guidance. In other words, things are going to remain cloudy for some time.

Finally, visit DealProfiles.com to check out other recent M&A activity.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements.

Bambi Francisco, a columnist at MarketWatch, has a very interesting piece this week: MySpace-engine.

Despite being the second most trafficked site on the Web, MySpace is still a teenager when it comes to monetization. True, generating $200 million in revenues is no small feat (especially for a company less than three years old). Then again, companies like Google and Yahoo! are sucking-up much of the enormous amounts spent for online advertising.

So, why shouldn't MySpace jump into the search game? One idea would be to purchase a company like LookSmart (Nasdaq: LOOK). The company has made a comeback – and more importantly, has the necessary search infrastructure (which took hundreds of millions to develop over the years). And the market cap is dirt cheap: $95 million. In fact, the company has $44 million in cash and liquid securities.

According to Francisco, about 8.2% of Google's traffic comes from tools on MySpace.com. Interestingly enough, it is the biggest source of traffic for Google. So, it looks like a no brainer for MySpace to have its own search engine.

Actually, this morning, I talked with the CEO of a company called Foldera. It's a Web 2.0 collaborative tool focused on small to medium-sized businesses. His product also pushes lots of traffic to Google. "Why not try to monetize this large amount of corporate traffic?" he told me.

Yes, many online communities are asking themselves this question. And, with the huge amounts of money at stake in the online advertising market, Google will need to deal with fierce competition on all fronts – not just from Yahoo and MSN.