Microsoft Corporation (NASDAQ:MSFT) acquired Powerset for a rumored $100 million on July 1st.  Since then Microsoft and Powerset have been working away to integrate search technologies into Live Search.  Some of the integration projects include Freebase Answers, improved captions for Wikipedia results on Live Search, and related searches.  These features are only available for several results and users.  Depending on the feedback, Live Search will keep the best features and remove the rest of them.

Powerset uses technologies uses xRank for biographies and Factz to to display better related search results.  Microsoft originally bought Powerset in an effort to compete with Google search relevance.  From an overall brand perspective, Microsoft has a long way to go in order to compete with Google for search engine market-share.

Apparently Microsoft has opened up their fat wallet to bring more users to Live Search.  Microsoft made a deal with HP to have the Windows Live Toolbar preinstalled on PCs.  Microsoft also hired Kowabunga to have affiliates push the downloading of Windows Live Toolbar.  Microsoft is willing to pay $2.50 per download of the Toolbar.

Dr. Scott Prevost, General Manager of Powerset and Dr. Hugh Williams, Primary Development Manager of Live Search published additional details on the Powerset blog.

Microsoft Corporation (NASDAQ:MSFT) is rumored to be acquiring Powerset.  Powerset is a semantic search engine company that raised over $12.5 million in funding a couple of years ago with a valuation of $42.5 million.  Powerset at one point claimed that their technology had a few steps up on Google Inc. (NASDAQ:GOOG): the ability to decipher the full meaning of phrases while searching.

Two years later, Powerset’s first product was a Wikipedia-search feature.   

I’m sure Powerset could have come up with a better way to show off their technology.  Powerset’s Wikipedia search just doesn’t seem exciting.  Especially since Wikipedia already has a built-in search engine and Google works even better for finding things on Wikipedia.

Powerset is now ready to flip though.  They’ve specifically hired Allen & Co. to help them find someone to buy them for a price that is about $100 million or more.   Is Microsoft actually going to pay that price?  We’ll find out next month.  VentureBeat broke the news of the acquisition rumor.

Related Links:
Powerset website
TechCrunch
VentureBeat

Powerset Inc. is a Palo Alto, Calif.-based search engine company that was started in late 2006. Barney Pell claimed that their search engine technology is highly capable of taking on Google’s search algorithms. Investors believed it so $42.5 million was plugged into Powerset. Investors include Reid Hoffman, Peter Thiel, Carl Page, Sean Parker, and Eric Tilenius. Foundation Capital and The Founders Fund were involved in Powersets investment too. Yesterday, the search engine company released their first product built around Wikipedia.

The way that Powerset has designed search results is pretty good.

To search for Wikipedia articles, users can enter keywords, questions, and phrases. Powerset aggregates information across multiple sites and articles. While this is a good start, Powerset needs to be strategic about how to launch a full-scale competition against Google. Below is a video demo of the site.

Powerset Demo Video from officialpowerset on Vimeo.

Related Links:
Barney Pell’s Weblog
Powerset Blog
Powerset on Twitter

To date, Powerset is probably one of the most hyped startups that I have heard of so far. The company has raised millions of dollars as of 2006, has only a few testers, and does not have a live product out yet. The way I see Google right now is that they are a search monopoly. Google PageRank seems flawless and difficult to compete with which is why I think so many people are interested in what Powerset is doing. Powerset even licensed technology from the Palo Alto Research Center to create a search engine that reads every sentence on the web.

So what makes Powerset different and how do they have the audacity to think they can compete with Google. One sentence: “Unlike other search engines that index keywords, Powerset does a deep linguistic analysis on every sentence it reads.” This line is impressive enough to even get Carl Page, the brother of a Google co-founder to invest in Powerset.

The above news is so 2006, so what is Powerset doing these days? They are gearing for their 2008 launch:

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In a mere 33 days since Pulse 2.0 last wrote about Powerset Inc., there has been an introduction of new information regarding the website’s plans to take on Google Inc. head-on and has also now been backed by $12.5 million in Round 1 of funding. The company had previously raised $30 million as a pre-investment.

The pre-investment came from a long-list of angel investors including Reid Hoffman (the founder of LinkedIn), Peter Thiel and Luke Nosek (founders of PayPal), Carl Page (the brother of Google founder, Larry Page), Sean Parker (a founder of Facebook), and Eric Tilenius (founder of Answers.com). The Round 1 investment of $12.5 million was provided by Foundation Capital ($7 million), The Founders Fund ($3 million), and the other $2.5 million was additional investments by the angel investors.

The idea behind their company is that their search engine is based on “natural language,” a component of search that most, if not all search engines lack in quality. An example that VentureBeat provides is that for most search engines if you type in “Who acquired IBM?”, then most other search engines would return the companies that IBM has acquired since these search engines do not understand the difference between subjects and objects. I put it to the test and here is what Google had returned:

For this question, it is expected that Powerset Inc’s search engine would only return results of companies that had acquired certain IBM units such as IBM selling their PC group to Lenovo or AT&T acquiring IBM’s Global Network Business.

For previous coverage of Powerset Inc., click on the category link below or check out the linked VentureBeat article above.

The Palo Alto, CA founders of Powerset Inc. are very hungry. Barney Pell, an AI expert claims that their searching technology is capable of being more advanced than Google. Currently Powerset is on the verge of raising $10 million and is asking to have their company valued at $20 million before the investment. If a VC plugs in $10 million in Powerset, then they would own 33.3% of the company.

Some blogs and news articles are pondering how it is possible for a highly ambitious former NASA and SRI engineer such as Pell be so confident in directly taking on the search experts employed by Google. However, Pell pitched Powerset to Bay and Foundation Capital and investors are looking at Powerset as a serious investment.

Powerset had raised roughly $2 million from various investors including CommerceNet and angel investor, Reid Hoffman. This round of funding was worth convertible notes (converts into shares) after Series A funding is complete.