While Microsoft and Yahoo! engage in their odd mating ritual, they are benefiting the very company that is driving them to seek partners. Internet advertisers can't figure out what the two companies will look like in six months, so search leader Google is set to profit from the confusion.
"We find this to be a very advantageous situation for Google," Cantor Fitzgerald analyst Derek Brown said Thursday. "The longer this gets dragged out, the better for Google." He added: "The more complicated a deal gets, the more difficult it becomes to satisfy all parties, and the more complicated the integration gets, the more it favors Google."
As Yahoo! (nasdaq: YHOO - news - people ) blows hot and cold -- more cold -- about teaming up with Microsoft and casts around for other partners, the outlook is getting increasingly unclear. "This is the first time that we have seen real feasible alternatives that could derail the Microsoft deal," said analyst Jeffrey Lindsay of Sanford C. Bernstein.
On Friday, Microsoft's chief operating officer said at a news conference in Mumbai that his company had made a fair offer to Yahoo! and that no matter what happened with the deal, the company was determined to grow in online advertising capabilities. We believe we've made a very fair offer to Yahoo's board of directors," Kevin Turner said. "Currently, it's in their hands to decide the outcome of that offer," he said.
Turner said Microsoft would "continue to drive market share from a search standpoint within the consumer space, and that's a strategy we're committed to in the long term."
The Yahoo bid was "a tactic and a strategy" toward that end, Turner said."The rest is now up to their board," he added. "With or without the acquisition we are committed to becoming a world-class digital-advertising company."
Yahoo's resistance to Microsoft's offer of $31 per Yahoo! share, made on Feb. 1, recently took a turn when Google (nyse: GOOG - news - people ) it announced a two-week "trial advertising" partnership with Yahoo!. The tester program involves Yahoo! allowing Google to show advertising links alongside up to 3.0% of its U.S. search results. (See: " Yahoo! Gets In Bed With Google")
There were reports Wednesday that Yahoo! may also be close to striking an arrangement that would combine the search engine company with AOL, the struggling Internet division of Time Warner. (nyse: TWX - news - people )
Yahoo! isn't the only one complicating a potentail deal. Microsoft may try teaming up with News Corp. (nyse: NWS - news - people ), which could lighten the financial burden of purchasing Yahoo! and add the nice touch of a vibrant social-networking site, MySpace. (See "Menage a Yahoo!")
