Jellyfish.com, a Middleton, Wis., online discount shopping site that went live just over a year ago, has been purchased by Microsoft Corp.

The purchase took effect Thursday, but the price is not being disclosed, Jellyfish.com chief executive officer Brian Wiegand said Monday. A formal announcement of the sale is expected today, he said.

Under terms of the deal, Jellyfish.com will keep its identity even as it functions as part of Microsoft, which is based in Redmond, Wash.

The 26 Jellyfish employees, including co-founders Wiegand and Mark McGuire, will stay at 1600 Aspen Commons.

"Everyone here is excited, " said Wiegand, a serial entrepreneur who started and sold two previous technology companies. "I 'm extremely happy with Microsoft as a partner ... It 's a huge win for Jellyfish and for the state of Wisconsin. "

Microsoft contacted the Middleton company about three months ago, Wiegand said.

"We think the technology has some really interesting potential applications as we continue to invest heavily in shopping/commerce as a key vertical for Live Search, " Alex Gounares, Microsoft corporate vice president for the Search & Advertising Platform Group, said in a written statement. "We are pleased to welcome the Jellyfish team to Microsoft. "

Jellyfish is a 24-hour-a-day shopping Web site that lets shoppers search for specific products and compare prices, with a cash-back plan. It also offers "smack " shopping -- the term for a group of jellyfish -- featuring themed segments. Products are shown one at a time without saying how many are available. The price keeps falling but shoppers who wait for the best bargain may lose out if the products are sold out by then.

Jellyfish also offers viewers a personal page and a chance to chat with other shoppers.

UW-Madison School of Business professor Ray Aldag is a Jellyfish subscriber. He said he checks the Smack Shopping shows regularly and has tried to snag some items "but I 've always gotten beaten out. "

"Jellyfish is a different business model; I 'm just fascinated, " Aldag said. Having Microsoft buy the business is great, he said.

"For one thing, it 's nice to see some more recognition of local firms. We 've got some really great high-tech companies, " said Aldag.

Microsoft has been hugely successful but also realizes that "in Internet technology, life changes very quickly, " said Dan Olszewski, director of the UW-Madison Weinert Center for Entrepreneurship. "I think they do a lot of acquisitions from the offensive and defensive standpoint: they don 't want to be left behind, " he said.

In an interview in July, Wiegand said Jellyfish had sold nearly $5 million worth of products, "everything from bicycles to shoes. " The company raised $5 million worth of financing last October, after the co-founders, their family and friends and Kegonsa Capital Partners came up with funds to start the business in early 2006.

Kegonsa, a Fitchburg group with 42 Wisconsin investors, led the second round.

"Brian and Mark did a tremendous job, " said Ken Johnson, Kegonsa 's managing director. Initial investors "made about 15 times our money in 14 months, " Johnson said; second-round participants made about twice their investment. "That 's accomplishing a lot in a short period of time. "

In March, NameProtect, started by Wiegand and McGuire in 1997 to research trademarks and monitor the Internet for brand-name abuse, was sold to Corporation Service Co., Wilmington, Del., for an undisclosed amount. Wiegand also co-founded Business Filings, an online business incorporation service, with Rick Oster in 1996. It was sold to a Dutch publishing company in 2002 for $14 million.