The model of Wikia search is to provide some bare bones search results through open source software along with tools where social networks can form and make these results better. The idea being, once fully bloomed, the people polish on the initial results will provide a better experience than that of just a pure algorithm. The initial results are really just an enticement to get people to come in and create something that is interesting.
However, they positioned it wrong. The press reported -and people read - that Wikia launched a search engine. Terms like "search engine" bring with them a certain user expectation. If your results are bad, your product is bad and your launch is bad. While Jimmy Wales was clear to say in the release that the results were poor, no one reads that. Instead they read Wikia launched a search engine. Not surprisingly, users weren't happy.
But they weren't launching a search engine. They were launching a social network. One that needed people. What they were really doing was conducting a recruiting drive for people to join their social network around search. But that's a complicated message, one that's tough to translate through the press.
Unfortunately for Wikia, there's no such thing as a PR re-do - once its out there, its out there. But, with that, I wouldn't completely dismiss them. The Wikia community is a loyal (and large) one. Energizing that group has produced results in the past. Ironically, the poor search results of the Wikia search today should in theory actually help garner the community involvement - if the results were good, there's no need for people to come in and clean them up.
So, I'm not counting these guys out just yet. First they need to fix their positioning. Then, just like Uncle Sam, they need a few good recruits.