Microsoft to acquire search start-up Powerset

Deal comes less than 3 weeks after Yahoo deal falls through

Microsoft Corp. and Powerset Inc. today confirmed a deal in which Microsoft will purchase the search-engine start-up.

Neither company mentioned the terms of the deal in the separate blog entries where they announced the agreement.

A Microsoft representative said the companies are not disclosing the financial terms. The news comes several days after a report about the deal circulated on the Web. That report set the price at about $100 million.

In a blog entry attributed to Microsoft Senior Vice President Satya Nadella, the software vendor said the Powerset team will become part of Microsoft's Search Relevance unit and remain in the start-up's San Francisco offices. Powerset has 63 employees, Microsoft said.

Powerset is pioneering semantic search, a technology that Nadella said is valuable to Microsoft's direction for its search engine.

Semantic search attempts to extract meaning from search queries and Web pages rather than simply matching them up with relevant links based on keywords or previous or related searches. Search-engine leader Google Inc. primarily uses keywords to deliver search results.

"We know today that roughly a third of searches don't get answered on the first search and first click," Nadella wrote. "Usually searchers find the information they want eventually, but that often requires multiple searches or clicks on multiple search results."

Nadella cited two specific problems for the delay in finding information with traditional search methods -- differences in phrasing or context between a user's search and the way information is expressed on Web pages, and lack of clarity in the descriptions for each Web page in the search result.

Powerset is testing a search engine that attempts to understand the meaning of Web pages, in part by using technology licensed from Xerox Corp.'s PARC subsidiary. That technology creates a semantic representation of Web pages by parsing each sentence and extracting its meaning.

In a blog entry, Powerset's Mark Johnson said the company believes Microsoft will help it deliver its technology to a wider audience much more quickly than the start-up could do itself.

"Microsoft shares our goal to improve search through deeper analysis of queries and documents, and understands that our technology and expertise will play a key role in the evolution of search," Johnson wrote. "With an existing search infrastructure, incredible capital resources, unlimited data, a leading search team, and clear mission to revolutionize the search landscape, Microsoft can rapidly accelerate our progress in building semantic search technology and bringing it to full Web scale."

Microsoft plans to integrate Powerset's technology with some of its own natural-language technology, which has been in development in Microsoft Research, Nadella wrote.

The company will disclose more details on how it will use Powerset's technology in its Live Search engine at a later date, he added.

For years, Microsoft has been looking for ways to bolster its search strategy, and it needed an alternative to purchasing Yahoo Inc. when that deal fell through.

Since search-based advertising is the largest slice in the online advertising pie, Microsoft must increase the profile of its Live Search engine in order to build that part of its business.

Live Search is seen as far inferior to Google's search engine, and also ranks behind Yahoo in terms of how often it's used.

Copyright © 2008 IDG Communications, Inc.

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