Powerset is perhaps one of the most talked-about up-and-coming search engines. They promise to give you the holy grail of search- a search engine that actually understands what you want and gives you the answer right there on the results page. They are led by smart, successful founders, and have hired top engineers.

But sometimes the most interesting question to ask is not what they’re talking about, but what they’re NOT talking about. For instance, how in the world is Powerset going to get to break-even profitability? Of course, there’s the usual, “we’ll just sell ads” answer, but, that’s hardly getting to the heart of the matter.

Let’s look briefly at the economics of search. Google is the gold-standard benchmark, earning about $0.20 per search. Yahoo, which has been in search (through its acquisitions) even longer than Google doesn’t even come close to that! Powerset is going to need 3.33 million to 15 million searches per month to break even. It’s going to take Powerset a while to get anywhere near that level of earnings, due to the learning curve associated with bringing a new product online, monetizing it effectively, and of course, acquiring a large and loyal customer base. And, their search monetization numbers may differ significantly from Google’s due to the nature of their product. If they can deliver the answer to your question right on the page, perhaps ad click-throughs will not be as high as other search engines. With over 70 employees (my guesstimate based on LinkedIn numbers), they’re probably burning about $8 million a year so their $12.5 million in funding will only take them to around this time next year. Their staff is currently rather R&D heavy, so, as they find the need to become a real revenue-generating company, they’ll have to increase their hiring of other types of employees (sales, marketing, business development). They’re going to need at least another $20 million in funding to give themselves enough time to gain any traction in the consumer search marketplace. Growing the company so quickly, and maintaining such a high profile, they have raised the stakes dramatically and must truly do something amazing! They have built a great team, and have some interesting technology, so it’ll be interesting to see what they come up with.

Screenshot of Powerset’s Entertainment Search (from Demo Day)

About the Author: Jason Zien is a techie working on search engines at kosmix who enjoys blogging in his spare time. You can read his blogs at spotsearch.blogspot.com and topicpoint.com.