Google may end up as winner if Microsoft buys Yahoo!

One of the biggest players behind Microsoft's drive to buy Yahoo has never been at the bargaining table - Google.

That company's dominance in search advertising prompted Microsoft CEO Steve Ballmer to go shopping and seek a tie-up with Yahoo so he could bolster his efforts against what has turned out to be one of Microsoft's toughest competitors.

If the deal happens, Google could face a stronger challenge in the $41 billion online advertising market. But a protracted antitrust review by U.S. and European officials, or difficult corporate integration, could actually help the Mountain View search giant.

And if the deal does not occur? Google still wins. Most analysts believe the Mountain View juggernaut will continue gaining market share.

More than half of Web advertising revenue comes from online queries. In March, Google garnered 59.8 percent of the U.S. search market, while Yahoo had 21.3 percent and Microsoft, 9.4 percent, according to ComScore.

Microsoft, which has sputtered online, decided that hooking up with Yahoo of Sunnyvale in a $44.6 billion deal is the best way to gain traction against its rival.

But don't expect quick results.

"The Yahoo structure, as far as I'm concerned, does not work as effectively as Google's does," said George Kepnick, co-founder of DottedOnline, a search marketing firm. "It's the same thing with Microsoft. So merging two platforms that don't work too well on their own isn't going to create a Google killer."

In other aspects, though, the companies if they combined could pose new problems for Google.

Ballmer has noted that Yahoo and Microsoft have duplicate services. It's expensive to run services like e-mail, instant messaging and search. A joint effort would free up more resources for a fight with Google.

"You have more engineers," said Karsten Weide, an analyst with market research firm IDC. "That makes the combined entity more competitive than each one currently is."

While a retooled competitor may not ever be able to catch Google in search ads, it could be in a strong position to dominate in emerging advertising areas, such as video. Google, which acquired online video sensation YouTube, hasn't been able to exploit its popularity for advertising revenue.

"Brand advertisers shun it because they don't think it's safe," Weide said. "Very significant amounts of money will be moved out of broadcast television onto the Internet, hundreds of millions of dollars, over the next few years. Right now, nobody is in a position A combined Yahoo and Microsoft could also become leaders in behavioral targeting advertising - technology that enables advertisers to offer up ads more relevant to Internet users based on their online actions, such as Web sites visited. Last year, Yahoo acquired digital marketing company BlueLithium, which specializes in this software.

Both Yahoo and Microsoft have leading mobile technology. Google's Android project, a new operating system for cell phones, is only at the prototype stage. Yahoo's Go software, on the other hand, already runs on hundreds of mobile devices. And Microsoft last year acquired TellMe, whose voice-recognition technology enables people to get directions through their phones by speaking the address.

"If you look at all the assets Yahoo and Microsoft have for future markets, they are very strong," Weide said.

Google, though, could gain an advantage if its chief competitors get tied up with regulatory red tape.

"In the fast-paced Internet industry, that kind of delay is an anathema," said David Garrity of Dinosaur Research. "It would leave the two organizations as sitting ducks. And it would be excellent for Google."

Even a swift completion of the deal wouldn't guarantee success.

"The real question is, how well does Microsoft execute the integration and whether, in the process, Microsoft manhandles the Yahoo enterprise such that by the time the process is finished all the vital elements have decided to depart?" he said.