Microsoft confirms purchase of Farecast travel site

Microsoft bought Seattle-based airfare prediction and travel site Farecast earlier this month for around $115 million, according to a person familiar with the transaction.

A Microsoft spokeswoman would not comment on the terms of the deal, but did confirm the purchase, which closed April 9.

"Farecast has been a partner of ours on MSN Travel and we look forward to working closely with the Farecast team to incorporate and apply its technology in new and interesting ways," Whitney Burk, a spokeswoman with Microsoft's Online Services business, said in a statement.

It's not immediately clear what Microsoft plans to do with Farecast, which formed its first distribution partnership with Microsoft in July 2007. Burk would not comment on plans, other than to say that all 27 of Farecast's employees will become Microsoft employees as part of the acquisition.

Farecast President and CEO Hugh Crean said in an e-mail that the company is excited about the acquisition, but declined further comment. He said in a company blog that the "acquisition creates tremendous opportunities for the Farecast team and our customers. We look forward to sharing more details in the weeks to come."

Farecast was founded in late 2003 by Oren Etzioni, a computer-science professor at the University of Washington. The online service, launched in 2006, uses data-mining technology to predict whether the price of specific air-travel itineraries will rise or fall, and whether a currently listed hotel-room rate is a good deal.

"I feel like my baby is all grown up, and it's a very exciting feeling," said Etzioni, who remains on the company's board. He credited the current management and employees for taking his concept and "working incredibly hard over more than three or four years. This acquisition is really a credit to what they have built up."

The broad, data-mining technology underpinning Farecast has several potential applications that benefit consumers, Etzioni said. He declined to discuss Farecast's specific plans, but pointed to other examples, such as Clearflow, a new feature of Microsoft's Live Maps to help drivers dodge traffic jams, and the real-estate forecasting site Zillow.

Microsoft, which has averaged about two acquisitions a month in recent years, tends to pick its targets from outside of the area. Farecast joins aQuantive, WebFives and Seadragon Software among Seattle companies purchased by Microsoft since 2006.

Farecast attracted about $20 million in venture investment from Seattle-based Madrona Venture Group and WRF Capital, as well as Greylock Partners, Sutter Hill Ventures and PAR Capital Management.

In addition, the UW owned a small piece of the company and had licensed some technology involved in the deal.

Etzioni, whose past entrepreneurial successes include the co-creation and sale of search engine MetaCrawler in 1996, said the Farecast acquisition is an indication of Seattle's "vibrant ecosystem" for startups. All the key pieces were in play with this deal: the UW as a source of innovation; a venture community willing to back the idea; local and national management talent brought together here; and a local acquirer.

The region is not on the level of Silicon Valley, but "we're rapidly establishing ourselves as a No. 2," he said, adding, "I think there's more coming."

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com