Facebook Buys Chai Labs’ for Semantic Search Technology

Facebook has acquired online search company Chai Labs for $10 million

As Facebook vies to compete with Google and expand it’s search functionality from searching Facebook.com to searching the world wide web, it has looked to a vertically focused company steeped in Internet glory including Netscape and Andreessen Horowitz co-founder Marc Andreessen, LinkedIn chairman Reid Hoffman, and Google Ventures general partner Joe Kraus who are all investors and/or advisors at Chai Labs.

Chai Labs specializes in a technology it calls “Semantic Search,” which “uses proprietary crawling, artificial intelligence and data mining technologies to analyze and extract insights from millions of real-time data points across the web,” according to the company’s website. The “Semantic Web” is a term coined by World Wide Web creator Sir Tim Berners-Lee, which is a, “New form of Web content that is meaningful to computers.” The semantic web is gaining momentum as HTML5 includes more support for it.

So what does Facebook want with the semantic web?

Unlike when it has aquired online sharing sites like Friendfeed* and ShareGrove or purchased Web-based image-hosting companies like Divvyshot, Facebook’s purchase of Chai Labs does not have an immediately apparent value to users-the value it seems, is to Facebook who may be able to use the semantic functionality to hone search results based on a person’s profile, making results theoretically more accurate. While Facebook does have a built-in search engine that lets users search the entire Internet (which is basically just an embedded Bing engine), many users still use Google or Yahoo for search, but Facebook is trying to change that. While Google is trying to become more like Facebook by creating Orkut, purchasing Jaikut (and then abandoning it), rolling out Wave (and then pulling it back), and now Buzz (and possibly a Buzz/Wave combo called Google Me), Facebook is trying to become more like Google.  Why?

Follow the Money

Search engines and social networks both make money by selling ads and they are successful at doing so because ads are displayed to the users most likely to click on them (and purchase the product or service).  How they are able to do this has everything to do with the purchase of Chai Labs.  The more targeted search results are, the more likely users will find ads relevant, and the more likely users are to click, which makes Google and Facebook gobs of cash.  While Google makes some money from Google Apps customers, the majority of their revenue is from ad sales and Facebook wants a piece of that pie.  This is all part of the recipe.

*FriendFeed’s executive team included Paul Buchheit, creator and lead developer of Google Gmail, and Bret Taylor, who was responsible for the launch of Google Maps. Taylor is now chief technology officer of Facebook.