With Its $100M Acquisition Of VideoSurf, Microsoft’s Video Search Now Has Big Potential

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Yesterday morning, we reported that Microsoft had acquired Israeli video startup, VideoSurf, for approximately $70 million. The deal indeed has been greenlighted, as Microsoft confirmed in its blog post yesterday. However, at the time, the price of the acquisition was unclear; several sources (who wished to remain anonymous) pegged the number at $70 million. But, today we’ve heard from a solid source that the actual price of the acquisition was actually just under $100 million — in cash.

Sure, it’s not quite the $8.5 billion Microsoft paid for popular voice and video-over-IP service, Skype, but for a relatively young startup, this is a big win. As to its backstory, VideoSurf was founded by four Israeli entrepreneurs, Eitan Sharon, Lior Delgo, Shai Deljo, and Achi Brandt in 2006, and the San Mateo-based startup has since raised $28 million from a bunch of notable investors, which include Facebook COO Sheryl Sandberg and her husband, SurveyMonkey CEO David Goldberg, along with Al Gore and Current Media CEO Joel Hyatt (as well as a few others, like Pitango VC and Verizon Ventures.)

Why did Microsoft make this acquisition? Well, just as Microsoft plans to integrate Skype into Xbox Live and VideoKinect for Xbox Live to allow gamers to Skype from their consoles, the tech giant plans to add VideoSurf’s technology into the Xbox 360 ecosystem (specifically Xbox Live) as well. Microsoft will be rolling out voice search over the holiday season and is currently in the process of integrating content from video and cable providers (like Verizon, Comcast, HBO and Epix, for example) into Xbox Live.

Microsoft is also adding a search layer over the platform to let users search for content from apps and beyond, so that one searching for Lord Of The Rings might get results from Netflix, or Comcast’s library, or apps from its Zune Marketplace. Because VideoSurf’s platform is all about video discovery and allowing users to quickly find video content from a wide range of websites (like Hulu, Dailymotion, Metacafe, etc.), this will amp up Xbox Live’s search criteria, which, at this point, just relies on metadata offered up by the content provider.

Not only that, but VideoSurf also implements some cool audio recognition technology along with facial recognition functionality that allows the startup to pull from specific frames within videos, which, when combined, the company (and Microsoft clearly agrees) can provide better search results (and relevancy) coupled with an enhanced user experience.

This is also a smart move play by Microsoft when looking at its future ambitions for both Xbox Live and search on the whole. As Xbox Live adds content from other independent video providers, VideoSurf’s multifaceted search technology can provide a much-improved means of parsing video content from these indie providers that typically don’t have the same amount of data tied to their videos as the larger, premium content providers. If and when Microsoft adds YouTube to Xbox Live, they will need an enhanced search mechanism to serve refined results from the some-billion-odd videos YouTube counts in its bullpen.

Microsoft could also leverage VideoSurf technology for Bing’s video search, making search a less-painful experience across its devices. Considering the startup’s technology will allow Kinect users to search and discover content across multiple entertainment providers within Xbox Live and use Kinect’s voice search powered by Bing, you can see the sizable value proposition inherent in this acquisition. This could allow Microsoft, via Kinect’s unique interface, to offer rich web-based search through TV — potentially leaping over Google based on its current efforts to do the same with Google TV.

It will be interesting to see how the Xbox ecosystem improves with Skype and VideoSurf integration, but the future is definitely looking somewhat bright — something that’s not always said in when referring to the tech old timer.

For more, check out Microsoft’s press release here, and VideoSurf at home here.