Google grows stronger in Microsoft-Yahoo fallout

SAN FRANCISCO -- Microsoft's abandoned takeover bid for Yahoo appears to have culminated with a disheartening thud for those two companies but amounted to yet another coup for online search leader Google.

What began in January as Microsoft's most audacious attack yet on Google instead paved the way for the Internet's most powerful company to gain even more clout through a deal that gives Google access to a large chunk of Yahoo's advertising space.

By submitting to a partnership that endorses Google's search advertising technology as a better choice than its own, Yahoo is giving online marketers even more incentive to spend most of their money with its biggest rival, according to industry analysts.

It looks like such a sweet deal for Google that the U.S. Justice Department and lawmakers are expected to take a hard look at the arrangement to make sure it doesn't give Google too much control over the Internet's search advertising market.

Google currently has about 75% of the U.S. search advertising market followed by Yahoo at 9%, according to the research firm eMarketer.

Although they contend their alliance won't lessen competition, Google and Yahoo have agreed to wait until late September to begin working together so the U.S. government has more time to assess the potential impact.

Even more importantly to Google, the Yahoo partnership keeps a potentially valuable weapon out of Microsoft's control.

Without Yahoo's renowned franchise, Microsoft once again is scrambling to find a way to fix its unprofitable online operations and narrow Google's commanding lead in the Internet's rapidly growing ad market.

Google shares gained $18.56 to close Friday at $571.51 while Microsoft shares added 83 cents to close at $29.07 — an indication that some investors were relieved the world's largest software maker concluded it would be too expensive and troublesome to buy Yahoo.

On the other side of the fence, Yahoo shareholders had been clinging to the possibility that Microsoft would revive its last offer of $47.5 billion, or $33 per share, to buy the Internet pioneer. But those hopes evaporated late Thursday after Yahoo disclosed Microsoft had "unequivocally" rebuffed an attempt to renew the negotiations.