How Google Gains from Microsoft-Yahoo Deal

The Microsoft-Yahoo deal is aimed straight at Google. But expect the law of unintended consequences to kick in, and for Google to benefit from it at least as much as do Microsoft and Yahoo. Because of the deal, the greatest threat to Google's Internet domination -- the federal government -- may lose much of its ammo.

Under the terms of the deal, Microsoft's Bing will power Yahoo's search, and Yahoo will sell search advertising for both companies. The deal will help both companies by increasing revenue and reducing costs. Essentially, it combines two small also-rans and turns them into one larger also-ran.

No matter what Microsoft and Yahoo do, they're not catching up to Google. Google is simply too dominant. They may eat around the edges, but they're not going to cut dramatically into Google's search market share.

Google has recently been in the cross-hairs of the U.S. Justice Department, which has been looking at Google's potential anticompetitive actions. Now, though, Google can say that when it comes to search, there is competition. There's no real threat to Google, of course, but the company can certainly argue that a Microsoft-Yahoo combination means that Google can't wield any kind of anti-competitive power when it comes to search.

Google has a lot more to fear from federal regulators than it does from Microsoft and Yahoo. So the Microsoft-Yahoo deal may be one in which everyone wins. Microsoft and Yahoo increase their revenue and cut their costs. And Google gets a "Get Out of Jail Free" card from the feds.