So the much speculated bid has finally happened. Will they say yes? If they do what will the search industry look like in a years time.

Recent figures on search market share in the USA suggest that Yahoo may be losing ground and MSN/Live gaining, though there seems little suggestion of it in the UK. Indeed there is a suggestion in some figures I’ve seen that Ask is finally beginning to make an impact and is close to MSN/Live, though both are at a very low level.

Looking at the respective assets of Microsoft and Yahoo there is a great deal of overlap that would seem to suggest that any amalgamation is going to be painful for both staff and users. Both companies have mail systems, both have instant messenger systems, and of course both have search systems. The chances of duplicate systems surviving the accountants’ eagle eyes seem to be low, yet a lot of brand loyalty could easily be killed off if it’s handled badly. There some areas that will be attractive to Microsoft – the Flickr photo archive for instance – but the conventional wisdom amongst most commentators (Aaron Wall being a notable exception) seems to be that they want Yahoo for search.

Now Yahoo search is a strange beast these days. Aaron calls it stale and there is something in that description. Their speed of response seems slow – at one time they were faster than Google but these days it seems to take weeks before they respond to site changes – and their results are often very strange. The odd thing is that they themselves took over some interesting search engines but don’t seem to have done much with them – Alta Vista may have been an odd takeover choice but AllTheWeb was a very promising engine that seems to have been sidelined rather than incorporated. Maybe that’s one of the things that Microsoft want. Certainly they seem to be getting nowhere with their own search system; it was promising for a while about 18 months ago but once Live Search arrived it seems to have become erratic and on some searches produces some of the worst results I’ve seen. Another possibility is that they want the Overture PPC part of the business to shore up their falling ad revenues

Quite honestly I can’t see Google losing any sleep over the search aspects of the combination – they are so far ahead in that area that it seems impossible for anyone to challenge them unless they themselves make some bad blunders. Not impossible, given the negative press they’ve been getting over privacy for instance, but fairly unlikely. But they certainly seem to have been stung into action given their hard-hitting comments about “illegal practices” being carried into the internet arena. Maybe that’s just a knee-jerk reaction or maybe they think Microsoft are up to something and are desperate to nip it in the bud. Apparently they were concerned enough to offer Yahoo a deal to stave off the takeover.

All-in-all my suspicion is that the war between these two giants is going to be more far-reaching than just search. Such is Google’s lead that Microsoft can’t win on just search and they are a company that doesn’t like to come second. They must also be worried that Google’s attempt to switch users to online-based data storage and office apps is threatening Microsoft’s traditional monopoly in the PC office suite and operating system area. If they were to lose that then they’d be in trouble. So the search market may not change all that much this year but a lot of other things might.