Google acquires Applied Semantics

SAN FRANCISCO: Internet search company Google Inc. Wednesday said it had acquired Applied Semantics, a company that makes software that analyzes the content of websites in order to match them with appropriate advertising.

The acquisition was the largest yet for Mountain View, California-based Google, which was founded in 1998 and operates the most popular search engine on the Internet.

Terms of the deal were not disclosed, but privately held Google said it expected the purchase of the specialty software provider would boost revenues as it expands its offerings in online advertising.

Google generates revenues by selling ads, also known as paid listings, which appear at the top of the page when certain words or phrases are entered in its search box.

This paid listings business has proven to be one of the most lucrative forms of online advertising, and last month Google expanded its reach with a program that allows it to place ads on outside Web sites.

Under that new "content targeting program" Google ads will appear on partner company sites, through a technology that can understand the focus of a given Web site and select appropriate ads to run.

Applied Semantics, which employs 40 staff and is based in Santa Monica, California, makes a similar technology. Google said it first approached the company to consider partnerships but quickly decided that an outright purchase made more sense.

"I believe that over the past four or five years the user experience on the Web has decreased," Sergey Brin, Google"s co-founder and president of technology told Reuters. "In some ways it is harder to get information because of all the distractions."

STRONG SYNERGIES

Brin said that unlike annoying pop-up ads, advertising placed in the proper context had potential to help rather than harass Web users.

Applied Semantics" AdSense product enables publishers to understand key themes on different websites, knowing, for example, when the word "jaguar" refers to an animal and when it refers to a car.

"There are some strong synergies," said Danny Sullivan, who publishes Search Engine Watch. "They"ve acquired the company whose technology is closest to their own."

Sullivan noted that Google"s purchase could also be viewed as a defensive move to prevent rival Overture Services Inc, also based in southern California, from entering this contextual ad business.

Google has never publicly disclosed its sales or earnings, although it does say it is profitable, making it one of the few dot-com success stories. A recent New York Times article suggested it was still enjoying phenomenal growth. That report said the company"s revenue was supposed to grow from less than $300 million in 2002 to at least $750 million this year.

Google on Wednesday declined to comment on those numbers. However, the company said it had high hopes for its expanding advertising business.

Brin said publishing ads on outside Web sites would ultimately be a much larger business opportunity than running listings just on Google.com. Google is funded by venture capital firms Kleiner Perkins and Sequoia Capital.

(C) Reuters