HeadHunter.NET Inc. {HHNT}, an employment service, priced 3 million shares last night at $10, below the planned offering price of $12 to $14. Last September, Headhunter.NET postponed its IPO citing the usual "current market conditions."

HHNT intraday price chart

LookSmart Ltd. {proposed ticker: LOOK}, a search engine, is expected to offer 12 million shares at between $11 and $13 a share later this afternoon.

Phil Daniels, Internet analyst at PC Data Online says that both companies "may be aimed at too broad a market. [On the Internet} if you’re too broad in content, you are in some serious trouble."

LookSmart, the third-ranked online directory behind Snap and Hotbot, was founded in Australia in 1995. It had about 3.3 million unique visitors for the week ended Aug. 8, according to PC Data Online, whose rankings differentiate between directories and better-known Web portals, such as Yahoo! Inc. {YHOO}.

Yahoo! began as a directory but has since evolved into a more-diversified Internet business. LookSmart is also branching out into new lines of business, including Net-based talk radio, in hopes of becoming the next Yahoo!.

Getting there, however, will take some doing. LookSmart was visited by 7.3 percent of all Internet users during one recent week. By contrast, 44 percent of all Internet users visited Yahoo! during the same week. "The company has a lot of catching up to do," Daniels says.

What’s more, LookSmart’s visibility isn’t helped by the fact that many users don’t realize they’ve visited the company’s Web site. That’s because several leading Web portals, including the Microsoft Network, Excite@Home {ATHM}, and Netscape have deals to redirect some of their traffic to the laboriously crafted LookSmart directory.

Unfortunately, that strength may also be a weakness. "You really can’t value LookSmart the same way you’d value a portal," says Barry Parr, director of consumer e-commerce research at International Data Group. Because the majority of LookSmart’s traffic flows to the company’s site from other Web sites, "they have considerably less control over how they grow," he says.

A team of 200 editors maintains LookSmart. The company founders say screening done by human editors enables users to conduct more fruitful Web searches. At least one analyst agrees. "LookSmart is best-positioned against Yahoo!, but offers a stronger partnering story, so there's room for them in the market," says Kathryn Hale, an analyst at Dataquest.

But Daniels says it’s a sword that cuts both ways. "LookSmart sees [its contracts with Web sites] as an insurance policy. If they lose one, they still have the others," he says. "But the bottom line is the company is dependent on other Web sites for its success. That’s not the best position to be in." LookSmart’s pro forma filing with the Securities and Exchange Commission, which reflects the costs of recent aquisitions, showed 1998 revenue of $20.1 million with a loss of $17.9 million.

The outlook for Headhunter.NET, based in Norcross, Ga., may be even more problematic. "The market they are in is almost a natural monopoly," Parr says. "People go where the most ads are, and employers go where the most people are. Headhunter.NET is not that place, Monster.com is. There’s just tremendous power in being number one. It doesn’t take long for someone surfing the Web to figure out which site has more listings."

According to the PC Data Online report, the Headhunter.NET Web site was viewed by 289,000 unique visitors during one recent week, about two-thirds fewer than the market leader, Monster.com, based in Maynard, Mass. Monster.com is the flagship product of the Interactive Division of TMP Worldwide {TMPW}.

TMPW 52-week price chart

Several other Web sites, including hotjobs.com {HOTJ}, careerpath.com, and careermosaic.com are neck-in-neck with Headhunter.NET in terms of the number of visitors they’re pulling in. "It’s a very challenging business," Daniels says. "There’s no question we won’t see all these same players around in five years."

Daniels adds that traditional headhunters usually specialize in one particular field, building the kind of reputation that brings in clients. "There are still excellent Internet opportunities for companies in vertical employment markets," he says. "But Headhunter hasn’t carved out much of a niche."

Unlike many competing online employment services, Headhunter.NET generates revenue by selling premium spots to employers and job seekers, similar to the way publications sell display ads. In 1998, Headhunter had $4.3 million in red ink on revenue of $1.09 million.

It’s always possible both stocks could benefit from a renewed Internet IPO trading frenzy. "Stocks sometimes go up because they’re going up," says John Hannon, an analyst with Security Capital Trading in New York. But if the more skeptical view that greeted several recent and still floundering Internet IPO’s prevails, LookSmart and Headhunter.NET could be in for a rocky reception.