Most of Applied Semantics' 45 employees will continue working in the Santa Monica location, which will become Google's southern California product development center. (In comparison, Google has over 800 employees worldwide.) Google also said it recently opened an east coast engineering office in New York City, clearly signaling the company's aggressive plans for growth. The Google press release even referred to its listing of current job openings.

The acquisition serves to escalate further the growing competition between Google and its archrival Overture, which recently had worked out a contextual advertising partnership with Applied Semantics. That arrangement is likely now in jeopardy, though the companies would not comment. The contract is reportedly set to expire in August 2003.

(Poor Overture did not have a good week. It reported that its first quarter earnings were down and cut its financial forecast for the full year almost in half, which sent its stock price into a steep dive. Still, the company hopes that the recent acquisitions of Fast Search & Transfer and AltaVista will boost its strength to compete.)

The focus of Google's announcement and of most media coverage of the acquisition was definitely on the advertising side of Applied Semantics' business. It appeared to be the main attraction for Google. Lost along the way seem to be the enterprise products and domain name solutions that Applied Semantics offers. While these might be less lucrative for both companies than the ad business, it seems likely that Google would want to expand upon these other products as well.

A Google representative admitted there were definite synergies in the companies' enterprise businesses. But, when pressed for specifics, he said that Google's policy was not to discuss any product plans until they were "ready to go." He also stated: "We're excited—they [Applied Semantics] are a cool company."

Gil Elbaz, co-founder and chief information officer of Applied Semantics, said, "We're excited about combining our engineering efforts with Google's." He stressed the similar corporate cultures. "We both love what we do and are both passionate about producing good products." He's known Sergey Brin, Google's co-founder and president of technology, for a number of years, and feels the companies are a good fit. Elbaz declined to comment on how the acquisition might affect the company's customer and partner relationships.

Brin stated, "This acquisition will enable Google to create new technologies that make online advertising more useful to users, publishers, and advertisers alike."

In early March, Google introduced its new "automated content-targeted ads." Meanwhile, Applied Semantics had worked a deal with Overture. By early April, representatives for Applied Semantics were sending out the word (via e-mail to media outlets) that its AdSense product had superior technology and beat out Google's content targeting in its head-to-head comparisons. (Was this a clever sales strategy by Applied Semantics?) Perhaps Google noticed the comparisons and decided to buy the best—or steal it out from under its competitor.

Applied Semantics representatives said AdSense is superior to other paid listings solutions in a number of ways. Presumably, these improvements will soon be added to Google.

• AdSense technology processes the actual content of Web pages, whereas Google technology is only based on URL/Web log statistics.
• AdSense uses its CIRCA ontology to understand and extract key themes of a page, whereas Google relies solely upon user trends and patterns, which are often inconsistent.
• AdSense has the ability to discern ambiguous terms; Google has no disambiguation capability.
• AdSense provides advanced filtering technology; Google has no objectionable or competitive filtering mechanisms.

Applied Semantics was started in 1998—it was then known as Oingo--by two Caltech graduates, Adam Weissman and Gil Elbaz, with an interest in making computers more "human-literate." The pair worked to build a new architecture using their expertise in scalable information systems design, database applications development, software engineering, and natural language processing. Together with a team of linguists and software engineers, they developed the company's patented technology, CIRCA, which serves as the common platform for all Applied Semantics' products. A massive ontology, or knowledge base of concepts and their relationships, is coupled with its linguistic processing engine.

The Applied Semantics News Series is "software that automates content processing for major newspapers, e-publishers, and content aggregators to reduce their operating costs and increase productivity within the newswire, editorial, archiving, and syndication functions." It is currently being used by USATODAY.com and others.

The company also offers an enterprise solution called Applied Semantics Concept Server, which provides categorization, summarization, concept tagging, and event extraction applications tailored to specific industry needs. This seems a likely candidate for future integration into Google's Search Appliance (see our NewsBreak: http://newsbreaks.infotoday.com/nbreader.asp?ArticleID=17081).

Finally, the company's suite of domain name products offer an "intelligent infrastructure" for domain name registrars and domain name holders. It will be interesting to see the evolution of these products with the new owner.