It took a long time to happen, but it finally has – Microsoft has acquired part of Yahoo, the Search part, dumped it and is replacing it with Bing as reported in the New York Times – see Microsoft and Yahoo Reach Deal on Search Partnership.

I posted about this over three years ago – and it has come to pass – in  The Search Engine Wars – even painted about it.

…. Under the pact, Microsoft will provide the underlying search technology on Yahoo’s popular Web sites. The deal will give a lift to Microsoft’s search engine, which it recently overhauled and renamed Bing.

Bing, which tries to put search results in better context than rivals, has won praise and favorable reviews, after Microsoft spent years falling further and further behind Google in search.

With the addition of Yahoo’s users, Microsoft will be able to run more searches through the Bing technology infrastructure. It expects to deliver better answers to search queries over time as well, by learning from more peoples’ queries.

Reading Jason Calacanis’s email newsletter (he doesn’t blog anymore, so he says) – Jason said “Yahoo committed seppuku today“  – he brought up some good points:

… Microsoft’s obsession with taking Yahoo’s second place position and adding it to their 3rd place position is not an indication that it’s time to sell. Far from it. When Microsoft is interested in a space it is a clear sign that you should be investing in it–not selling it“.

” ….Microsoft is the buy sign, not the sell sign. The people at Microsoft are brilliant and not to be underestimated–history has shown this to be true.”

“…Yahoo is dying on the vine..”

[ Note: I've never met Carol Bartz so I can't speak to her abilities. Clearly she is a very competent deal maker and operator. However, she's not in the league of the growing "product genius" Google cabal of Larry, Sergey,Marrisa, Chad and Salar. ]

How true.  No one really cared about Yahoo! anymore, not as far as internet search goes .. Yahoo! become “irrelvent”.   Microsoft must have done their analysis, figured out they could win this one, and now they think they can cut into Google’s commanding lead by slowly choaking off their supply line, Paid Search.

To me, Google, as a company, is likened to Alexander the Great – with a small force they went on to conquer most of the known world – but they had supply line that went back to Greece – as I recall – cut that off, and the rest of the Alexander’s army would have collapsed (I’m not that astute a history scholoar to maybe, I don’t have all the facts right – I’ll admit that).  I think that’s what Microsoft may be trying to do – destroy Google; probably won’t work but it will give us a run for the money for the next 2 years or so.

It also means that Search Optimizers (I do SEO, still) will now have to optimize for Google AND Bing-   SEO just focused on Google as Yahoo! and Microsoft were largely “noise” and “irrelevant”, and everyone knew it. In the last two months Bing has gotten a lot of attention – it’s a better search engine than Google, it’s nicer looking too; Microsoft delivered.  Jason goes on to say:

Round Three
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And so ends the second chapter of search and begins the third. Chapter one was inception up until the launch of Google.

Chapter two was Google’s rise and Yahoo’s death.

Chapter three will be the two-horse race of Microsoft and Google, with the inevitable emergence of a third and fourth player.

That’s the silver lining for start-ups in all of this. As Google and Microsoft lock into a dog fight for revenue and market share, leaving the Yahoo carcass on the side of the road,the bevy of crafty start-ups will get their chance to take the third, fourth and fifth positions in this very important race.

The lesson for all start-ups–and BDC’s (big dumb companies)–is that innovation is all you have. Once you stop innovating you lose your talent and you lose the race. Never. Stop. Innovating. Never. Never. Never.

Reactions to the Microsoft – Yahoo Search deal range from EConsultancy industry expert quick  survey (which doesn’t have much info in it for me) to a description of the deal in layman’s terms from Read/WriteWeb.