MSFT's acquisition of Powerset is not about search

The recent $100 million acquisition of Powerset, the semantic search engine company, by Microsoft looks to be more to do with advertising than beefing up the software giants' search capabilities.

So far, Powerset has only demonstrated its technology against Wikipedia. It's a neat exhibit but it is highly computer intensive. You would need a massive amount of computer power to run that semantic search technology across the entire Internet.

Also, how many searches would benefit from a semantic component? Not many. Most searches are fairly direct in my experience.

Where Powerset's technology could prove its usefulness is in contextual advertising. That's a much smaller semantic problem to handle, and it is a semantic problem that would result in the largest payoff.

The reason Yahoo is outsourcing some of its advertising to Google is that GOOG is better at contextual advertising in than Yahoo. GOOG can monetise those searches better than anybody else--at least for now.

If Microsoft can improve contextual advertising then maybe it can win that type of business from Yahoo and others. If advertisers through MSFT get better conversions than through Google then Microsoft wins, imho. - - -