One after another, Yahoo and Microsoft are taking steps to thwart the other’s move in what could have great ramifications for the search engine and media industry, which ever way the deal swings.

A brief recap of the events follows:

January 2008

Microsoft made an unsolicited bid of $44 billion in cash and stock to acquire Yahoo! which sent the portal’s management into a drive to drum up counter offerings to prevent a takeover. Rumors spread on deals with AOL, News.corp or even a search partnership with Google.

April 2008

Microsoft fires a mail to Yahoo giving the company a deadline of three weeks to come to terms with the offering lest it be forced to take the offer directly to the shareholders. This could be adverse to Yahoo, considering its lost ground in the search market and the looming economic slowdown.

Just in

Yahoo’s reply was to ask Microsoft to up its price substantially from the present $31 per share or forget the deal. Yahoo announced an experimental test of ads delivered via Google Adsense to 3% of Yahoo search traffic. Then comes the news of Time Warner’s possible partnership with Yahoo in which the media company would get a 20% stake in Yahoo and in exchange merge its AOL operations with Yahoo’s services.

Microsoft did not take this lightly as in talks with News.corp for a combined bid in which they would together woo Yahoo and create a company by clubbing together MSN services, Yahoo and MySpace.com, the extremely popular social network owned by News.corp.

Google Vs the Microhoo

Nonetheless, these are some of the giants in the online media space shaping up what could be the best challenger to Google’s growing dominance in search specifically and in online technologies in general. Google continues to grow its market share. It’s doubtful whether Yahoo and Microsoft could realign (in case of an acquisition) in short enough time to mount a serious challenge to Google without losing more market share.

What has been significant in all this acquisition milieu is the new product announcements that Yahoo has made. The company continues to innovate, perhaps to send out the message that it can fight it out on its own. Microsoft may be keen to get Yahoo for a lot more than just gaining some grounds in the search space. Opportunities galore in mobile Internet space.

Yahoo was designed around the concept of portals – provide services to get users to stick around the site. This is opposed to Google’s strategy of guiding people to others’ content and monetizing from ads placed around it. While Google’s model has been successful on the web accessed from a PC, mobiles are a different story. Limited screen area and high effort for user input means that ‘portals’ have immense benefits. It is here that Yahoo stands to gain with its multitude of services and this may be what is driving Microsoft’s acquisition plan.

Supposing the acquisition does get settled, there will be a lot of ruckus raised on the anti-trust front and expect legal suits to delay (while charging hefty fees) the ultimate merger. Yahoo’s acquisition would see the demise of one of the pioneers in the Internet front, but there is hope that Microhoo would make a more powerful competitor to Google. And more competition means that ultimately the user wins!