The Web search technology provider could face significant revenue losses, as its largest customer, Microsoft, continues to test its own search tools. LookSmart stated in its second-quarter financial report, filed last week, that Microsoft began testing its own search technology on several of its U.K. sites in July. Those tests eliminated the directory layer of search results in which LookSmart's listings currently appear, according to the company. LookSmart estimated that it derived 64 percent of its overall listings revenue from Microsoft-related business over the last six months. According to LookSmart, Microsoft indicated that it may combine directory and index layers of search results on its Web sites into a single set. Directory listings are selected by editors who evaluate sites by categories. Index listings are generated by crawler-based search technology. LookSmart said consolidating the listings would "likely result in significantly lower paid clicks and listings revenues" and admitted that it could lose its distribution deal with the software giant altogether.