I'd really like to discuss a different topic for a change, but it seems Microsoft is again the big story of the day, having just inked a major cross-promotion deal with Yahoo, whom Steve Ballmer has been sweet on for quite some time.

Microsoft's only significant online presence came from capturing the majority of the desktop browser market through leveraging it's Windows monopoly in the late nineties. Prior to the Internet taking off, Microsoft's then CEO, Bill Gates, dismissed it and Steve Ballmer would dearly like to make up for that miscalculation.

Microsoft originally offered bid of US$42 billion for Yahoo more than a year ago, which was soundly rejected to much aggravation from key shareholders. Over the intervening time, Yahoo's value has declined significantly and the company executives that stood in the way of the original deal have been ousted or left, leaving the door open for a new round of negotiations, which were rumoured to have been under way for some time. Now that it's been confirmed, we find that Microsoft has delivered themselves a very favourable deal, with Bing set to replace Yahoo's current search technology and Yahoo to become an advertising front for Microsoft.

If Ballmer believes that this is going to give him the leverage to cut Google down to size, then He is likely to be sorely mistaken. By replacing Yahoo's search technology with it's own, Microsoft is reducing competition while Bing is far from a proven success. It's a big gamble for Ballmer as if Bing continues failing to attract the attention of the public at large, and Microsoft's advertising machine can't convince them otherwise, Ballmer may be in the unfortunate position of driving the market away from Bing/Yahoo to the only other credible option, Google.

Yahoo will be the real victim of this deal. Between them, Bing and Yahoo have about 19% of the global search market, but Yahoo is far stronger in the non-English speaking markets, particularly in Japan where it controlled 64% of the market in 2008. By having Yahoo adopt the Bing search engine across the business, Microsoft is forcing Yahoo to give up it's successful search markets.

US regulators should not be seriously considering the Microsoft/Yahoo deal as it is potentially as anti-competitive as Google's Yahoo deal from late last year. If Microsoft fails at this latest attempt to capture a bigger slice of the search engine market, then Yahoo will have been destroyed, leaving Google with an even bigger majority market share.