Microsoft fired a new salvo in its so far unsuccessful war to catch up with Google in the search arena. The software giant bought Tellme Networks, a voice services and automated directory assistance provider. Tellme may not seem too much like an Internet search company at first glance, but it is -- especially when you consider where the next battle over search will be fought.
Though financial terms of the deal were not disclosed, it is widely rumored that Microsoft spent between $800 million and $1 billion to acquire Tellme. So what is Microsoft getting for that kind of money? Well, for starters, the company has been around since 1999, and it is already profitable. The Mountain View, Ca.-based operation boasts 320 employees -- including CEO Mike McCue, who, interestingly enough, used to work for Microsoft rival Netscape. Tellme has raised more than $230 million through several rounds of venture capital. The last of these rounds came in late 2000; Tellme is currently rumored to be making more than $100 million a year.
It's the automated directory assistance and call center services that are bringing in the money for Tellme. Clients of these services include Fedex, Cingular/AT&T, American Airlines, American Express and other large companies. Indeed, Tellme answers millions of calls every day. Customers use them to find information about local businesses, driving directions, sports scores, stock quotes, weather, news, movie show times, and more. Most of the time, people who use Tellme's services don't even realize that Tellme was the one providing the service.
When you think about it, then, Tellme is providing its users with search; it's just not Internet search in the form that most of us are used to. It's mobile search and local search, enabled by the telephone's voice interface. As the software giant explained in the press release announcing the acquisition, "Microsoft and Tellme share a vision around the potential of speech as a way to enable access to information, locate other people and enhance business processes, any time and from any device." In short, Microsoft believes that the next arena for the battle to win the hearts and minds of searchers is going to be mobile and local search, and that Tellme has what it needs to win.
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