It seems like last week’s rumors about Microsoft’s intention to acquire the search start-up Powerset were true, as today the companies confirmed the deal.

“Powerset will join our core Search Relevance team, remaining intact in San Francisco. Powerset brings with it natural language technology that nicely complements other natural language processing technologies we have in Microsoft Research,” wrote Satya Nadella, Senior Vice President, Search, Portal, and Advertising on Live Search blog.

Powerset has started up with the bold goal of creating a search engine capable of understanding human language. In May the company unveiled a toll which searches only within the articles posted on Wikipedia.
Whether the people at Powerset have managed to achieve that goal or not, is just a question of how demanding the user is.

The system manages to understand simple questions like “Who is “ or “What is,” but when moving to more complicated questions like asking it where one can find a species of plants or how one can make a simple device, it fails.
Commenting about the recent deal on Powerset’s blog, Mark Johnson explained that building a large-scale semantic search engine is expensive, requiring an engineering effort and computing resources beyond what most start-ups could ever imagine.

“Because our goals around improving search align so well, Powerset has decided to team up with Microsoft. We believe that this is the fastest way to bring our technology to market at a large scale,” Mark Johnson added.
Although  the financial aspects of the deal weren’t disclosed, apparently Microsoft paid somewhere around $100 million for Powerset.

Powerset is a San Francisco-based company, founded in 2005 by Foundation Capital, Founders Fund and Paperboy Ventures. The Powerset company managed to raise in November 2006 close to $13 million in venture capital and the figures point out that this might turn out to be a good move for Microsoft, after its big plans with Yahoo turned cold. Microsoft had several attempts to close an agreement with Yahoo and at a certain point decided that it was no longer interested in closing the deal.

In fact, Powerset’s acquisition is just one of the latest efforts made by Microsoft on the search market.
Last month, in an interview with Financial Times, Microsoft's chief executive Steve Ballmer has opened up about post-Yahoo strategy and emphasized the importance of search for the advertising business. The Redmond company is certainly going to think up something big, something new, and something that wasn't done this way before to catch up somehow with Google.

Also, Microsoft announced on June 17 its intention to open a research center in Europe, focused on the search technology, in order to improve its Live Search engine. Through its new European search center, Microsoft also hopes to learn some new things about the European searchers and their habits.

The announcement followed after in May Microsoft unveiled Live Search Cash back, a new service largely based on the technology acquired the Redmond-based company from Jellyfish. Live Search Cashback will offer rebates to whoever searches and purchases something from the companies enrolled in the new service.
Launched in 2005, Live Search, Microsoft’s effort to catch up with the web giant Google, has replaced MSN Search in 2006. Despite the company’s efforts, Live Search acquired only 11 percent of the search market, far behind its main competitor, Google.

Last year Microsoft’s Live Search has gone through a major technical update, dubbed as “the biggest update since our debut in January 2005.” Redmond’s engineers have focused on improving the relevance and they apparently achieved that by quadrupling the size of Live Search’s index.

Microsoft said at the time that it had come up with a new way of extracting data from the Web which automatically adds information from specific domains to the data base, including ratings and reviews; businesses (locations, contact information, photos, hours of operation, ratings and reviews); celebrities (buzz, images and videos) and more. However,  Microsoft’s Lives Search still trails well behind Google.