M&A Alert—April 28, 2010
Apple Buys Voice-Based Mobile Search Application, Siri
Transaction Size: $200mm
Siri is a voice-enabled iPhone application that allows users to search or execute command on tasks in their mobile devices. Siri, which is also capable of executing location-aware tasks, has a semantic technology that recognizes a user’s verbal intent or demand for services and matches the user’s intent or demand for services with services which are offered in the web. For example, users can use Siri to find a nearby gas station, or book a taxi or make a reservation at a nearby restaurant. As of today, Siri has a quarter million download of its free applications. Siri licenses speech recognition technology from Nuance that translates verbal queries to text, which Siri then translates into specific and actionable command. Siri partners with Yahoo! Local, Yelp, Citysearch, Twitter, Opentable, Movietickets.com and Weatherbug, from whom Siri collects answers and information for Siri’s users. Siri’s technology was based on a SRI project, a government-sponsored program that received $200mm in funding. In March 2010, Siri hired Gummi Hafsteinsson, who previously led Google’s voice-powered search application. Founded in 2007, San Jose-based Siri has received $24mm in funding from Menlo Ventures (Hal Calhoun, Shawn Carolan), Morgenthaler (Gary Morgenthaler, Karen Tuleta) and Li Ka Shing Foundation.
Apple sells PCs, mobile communication devices, and portable digital music and video players. Apple is most known for its Macintosh (computer/laptop), iPhone (smartphone), iPod (digital music/video player) and iPad (netbook/e-reader device). Apple also sells digital content including applications, movies, music, podcasts, games and TV shows through the iTunes Store. Recently, Apple announced iAd, a mobile advertising effort targeted to maximize revenues for Apple developers, advertisers and publishers, via an advertising revenue sharing model. Founded in 1976, Apple is headquartered in Cupertino, California.
Siri is a start-up company that provides its applications free of charge. According toVentureBeat, Siri’s business model is to charge a fee from all the transactions it facilitates, via affiliate commissions from partners and possibly from promoted results.
Other recent comparable transactions include Nuance’s purchases of mobile speech recognition, Spinvox in December 2009 for $102mm and VoiceSignal, a voicemail-to-text translator in May 2007 for $319mm, Google’s acquisition of Aardvark (a social search engine allowing users to ask questions to their friends within their social network) in February 2010 for $50mm, as well as Microsoft’s purchase of TellMeNetworks (a voice-based directory assistance provider) in March 2007.
Siri is Apple’s first foray into search. Siri provides Apple a voice-enabled search application that allows users to retrieve and act on relevant information related to common service categories such as restaurants, movies, events and weather, among others.
Architect Partners’ Observations
Siri demonstrates Apple’s decision to bring its resources to bear on delivering mobile search capabilities to consumers. While certainly this currently isn’t credibly competitive with Google and Microsoft’s web and mobile search efforts, directionally it’s telling.
As pointed out by Apple’s CEO, Steve Jobs, unlike online search that tends to yield listing-oriented results, mobile search will be facilitated mainly via a mobile application (such as Siri) that enables users to easily perform search (for example via a voice-enabled command) and retrieve results that are relevant and solution-and-action-oriented. For example, a mobile device user who is looking for a nearby restaurant should be able to voice that task to their mobile device and instantaneously call to make a reservation, and possibly use their Opentable dining rewards points at that restaurant, instead of just reading a list of restaurants or user reviews.
Resources that are published about Siri include analyses about Siri’s acquisition written by Timothy Hay of Dow Jones Venture and Christina Warren of Mashable as well as an overview of Siri’s technology written by Tom Gruber, Siri’s CTO and Co-Founder.