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UPDATE: Confirmed! Microsoft to Purchase TellMe (WSJ)

Tue, 03/13/2007 - 22:13 — Avery

UPDATE: Microsoft has announced the acquisition this morning (March 14). 

The Wall Street Journal refreshed the rumor mill today that Microsoft was once again approaching TellMe. This iteration of the rumor mill puts an $800 million price tag on TellMe's book of business.

At stake? A couple of application partners, a handful of Marquee enterprise accounts and prime position at a number of carriers where TellMe provides automated directory assistance and concierge services. It's a power play for mobile search - the same reason that Nuance ostensibly purchased BeVocal.

Since the days of Kai Fu-Lee (now camped out at Google China), Microsoft has been building a portfolio of technologies (including assets from Vocalocity and Ubiquity) to help enable natural language search. However, one of the major challenges of mobile search is monetization.

It's well accepted that people in the US won't pay for an infotainment voice portal in the same way that users in countries such as India will (where subscription based portals is becoming the norm). That's why all of the new mobile local search firms such as 800-Free-411 all base their services around toll free numbers and attempt to recoup the loss via advertising. The only services that people pay for on a regular basis is directory assistance.

Purchasing TellMe isn't about buying a hosting platform, nor is it about TellMe's technical assets - though I am sure they would be found useful until completely re-written in .NET. It's about buying their way into lucrative contracts to provide directory assistance for carriers such as Cingular.

Purchasing TellMe for $800 may sound steep, but it is one of the few independent companies that has contracts with multiple carriers for local search. Whomever purchases TellMe - be it Microsoft, Google or Yahoo! - will immediately become the dominant mobile local search provider. Microsoft pulling this off means that Google is stuck fighting to acquire second tier contracts or focusing on text/WAP search via SMS and Mobile Browsers.

If the purchase ever executes, expect TellMe to start shedding partners and enterprise customers so that it can focus on delivering Microsoft branded mobile local search to carriers.

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Tue, 03/13/2007 - 23:09 — Dan Miller

Call it the "Google Killer" strategy

I think you got it right, Avery. Even though your first paragraph says that Microsoft is "buying Tellme's book of business," it is really about the Colossus of Redmond making a modest down payment on what it perceives as a "Google Killer."

A whole 'nother rumor mill has been monitoring a toll free number called 877-520-FIND, operating under the i(educated) mpression that it is a voice-enabled version of Google Local. After all, there is very little difference between today's automated directory assistance service, which handles about 8 billion queries in North America, and a speech-enabled front end to Google local, or even its SMS enabled version, which allows a caller to enter a business name, city and state and then yields phone numbers and even driving directions as automated speech or text.

The Web is going mobile. Search is going mobile. Tellme *is* mobile. Microsoft knows that Tellme "gets it" and has cemented relationships with a number of major carriers (wireless and wireline) to field their DA queries "and more!" Everyone wants to be a Google Killer. At SpeechTek West, for instance, Coveo played the fact that it was working with Microsoft to support advanced search of enterprise data... All as a Google Killer.

Now the game gets good. I attach less than a 50/50 probability on the deal going through, but when it does...

the fun begins with speech enabled mobile search... which is something of vital importance to me.

Wed, 03/14/2007 - 04:17 — JohnH

Gooseberries!

I hate to say this, but I'm having a difficult time getting swept up in the whole mobile search mania. A name surely makes a difference, though. Put two hot terms- "mobile" and "search" together and you've got a PR sensation. I just think the name is WAY hotter than the market. Let's face it, Tellme's doing Directory Assistance today, and they're barely eeking out a profit at it. If a healthy, profitable mobile search revenue stream were right around the corner, then I think we'd be reading about it in Tellme's S1 and we'd see its present value reflected in the listed Tellme stock price. My guess is the investment community's applying a healthy discount to that mobile search revenue potential, and that's why we're hearing rumors of strategic acquisition. I think significant mobile search revenue is a long way off- if it ever materializes in a big way at all. Microsoft is one of the few who can afford to place this bet. Remember, ten years ago Microsoft started betting on speech ($80M for Entropic, if I recall,) and that's turning out to be an investment with a pretty long time horizon too.

This reminds me of "natural language." Ten years ago, when Nuance blue was just bursting on the scene in a big way, it was all about natural language speech recognition. They even managed to convince customers that a few thousand word grammar in a constrained domain was "natural language." This was a great marketing move, because it certainly sold better and buzzed better than "large grammar" speech recognition. To this day very, very few speech deployments are actually anything vaguely resembling natural language. In the same vein, maybe Tellme can turn enhanced DA gooseberries into mobile search kiwi. Enhanced DA has sputtered for a long time, and this could be the boost it needs to finally catch on. That could turn into a healthy revenue stream, but certainly not one that could justify the rumored price tag. Maybe this is more about Bill calling dibbs on something so Larry and Sergey can't have it. After all, it is a really hot term.

Wed, 03/14/2007 - 06:22 — daniel

Microsoft to purchase Tellme?

According to the WSJ, Microsoft is potentially going to purchase Tellme for a hefty $800 million. Given the fact that Nuance is acquiring BeVocal this transaction will have a greater impact in the market. This move by Microsoft indicates the company's strong desire to enter the mobile market in addition to resurrecting its short-lived speech recognition heritage. With over $120 million in annual revenues, Tellme was the largest voice portal provider in the market. By acquiring Tellme, Microsoft establishes a long-term position in the speech market by moving up the stack to the application and hosting space. It is likely Microsoft will aggressively attack the communications market. Word around the campfire is that Nuance, IBM and Google were in a bidding war for Tellme. Once the price tag exceeded the $600 million mark these vendors quickly lost their appetites for acquisitions.