Finding His Voice

Microsoft plunked down more than $800 million in March for Tellme Networks, a private company that provides automated speech-recognition services for Domino’s Pizza, FedEx, and others, as well as automated directory assistance. (Try it out by dialing 800-555-TELL. Even if you slur your speech like a drunkard, it will still connect you.) With Google dominating Web search, the acquisition was widely viewed as Microsoft’s gambit into the nascent mobile search market. But according to Mike McCue, Tellme’s 39-year-old cofounder, the deal heralds far more than that. He sat down recently with Fast Company‘s Linda Tischler.

FC: Tellme is Microsoft’s largest private acquisition ever and the fourth-largest deal in its history. What do they expect of you?

McCue: Microsoft wants us to advance the state of consumer device interaction, starting with the phone. Simply being able to say the name of a person and have it automatically dial the number. Find the nearest Macy’s and see driving directions in your car, or command it to find the next Starbucks. Say the title of a song or name of a TV show, and it plays immediately. It’s the equivalent of the PC’s graphical interface but for consumer devices–except instead of a mouse, you use speech. Our goal is to begin with the phone and ultimately make it work in your car, your home, on your TV, computer, MP3 player, and stereo system.

FC: Doesn’t Microsoft also want a beachhead in mobile search?

McCue: Yes. And we do more searches on the phone than any other company in the world–upward of 2 billion last year. Google and Yahoo and Microsoft did maybe 100,000 combined. Chump change.

FC: So one of Microsoft’s primary motivations in acquiring Tellme was to beat Google in this market?

McCue: We’re not out to kill Google. We’re out to make a great new interface for consumer devices. Google will be trying to do that too. There will be competition.

FC: Microsoft crippled Netscape, where you worked in the 1990s. You even helped the Justice Department develop its Microsoft antitrust case. Did you hesitate to sell out to them?

McCue: It’s funny. During the antitrust battles, I was in the thick of it–testifying to the Senate judiciary staff, the whole thing. Then I’d go out for drinks with the guys from Microsoft. We built up quite a camaraderie. Plus, I always had this niggly feeling that Netscape was too arrogant. Google is now the arrogant upstart. Not that Microsoft isn’t arrogant, but it is chastened. It’s the underdog, and it knows it.

FC: Was Google sniffing around Tellme?

McCue: Yes.

FC: And you spurned its advances?

McCue: It isn’t nearly as good a fit for us. Google isn’t a platform company. It’s a search-and-ad-space company.

FC: Did Microsoft come to you?

McCue: Yes, [CEO] Steve Ballmer did. He convinced me that we’re better off being part of Microsoft because we could get our vision out to billions of consumers. We would still operate independently and still be called Tellme.

FC: The deal also had all the financial benefits of a successful IPO without the downsides of going public, right?

McCue: Going public feels great–and then the next day, you wake up and realize you have all these expectations. It’s very hard to innovate and leap forward as a young public company when you need to hit quarterly goals.

FC: How accurate is your speech-recognition technology?

McCue: It works well north of two-thirds of the time. It learns over time, too. Perhaps someone asks for Duane Ready instead of Duane Reade, so we tune the system and it gets smarter. We also employ speech scientists and professional linguists who can deal with accents from all over the world.

FC: What’s the potential market for voice-powered applications?

McCue: In the enterprise segment, it’s a multibillion-dollar market. Directory assistance is another billion or two. That could grow by $10 billion or $15 billion in 5 to 10 years. Personally, I love the iPod; I have about 30,000 songs on mine. But it’s impossible to navigate with that wheel. It’s crying out for speech interface. That could be huge.

FC: What about mobile search?

McCue: That market is now basically zero. Over the next 5 to 15 years, it will be a $15 billion to $20 billion market.

FC: How will that be commercialized?

McCue: It will be ad supported. It’s going to take time to develop, but it will happen. We will handle the design, but Microsoft is doing a lot of work with ad engines, ad inventory, and the relationships with advertisers.