Microsoft: Doing Facebook, Yahoo search two-step to set up Google showdown?

The rumor mill over Microsoft's search for an online strategy is working overtime. The latest: Microsoft is working to buy Yahoo's search business and then Facebook.

The rumor mill over Microsoft's search for an online strategy is working overtime. The latest: Microsoft is working to buy Yahoo's search business and then Facebook.

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These rumors, swirling about Techmeme from John Furrier with an assist from Kara Swisher, have been stoked by Microsoft's revelation over the weekend that is talking to Yahoo about a deal that isn't an outright acquisition. Couple that chatter with the fact Facebook is in a skirmish with Google over data portability and you have an anatomy of a fine rumor.

But let's not get mired in silly things like search market share and data portability (oh no my profile is in a walled garden!). This Microsoft hubbub is really about arranging the pawns in an Internet chess game between Redmond and Google. Robert Scoble seems to agree. The rumors may change (the software giant's most recent statement could be a ruse to derail a Google outsourcing pact with Yahoo), but Microsoft will buy itself a Web strategy. It will be an online ad player. And it might just be a search player too.

Facebook is just starting to come around to two key facts:

  • It won't IPO this minute and it's unclear whether it can hold its valuation long enough;
  • And Microsoft will overpay to give Facebook its cash today.

If you're Facebook chief Mark Zuckerberg hat would you do?

It's not an easy answer. Sure you could keep buying servers, getting scale and bumping heads with Google, which is trying to make your business a feature. The smarter alternative may be to sell to Microsoft. Facebook profiles meet Office Live. Facebook profiles meet Office. Facebook profiles meet Outlook. You see where this could be headed pretty quickly.

But first Microsoft needs some search action so it'll overpay for Yahoo's search team. Then it spends big for Facebook. By time the week is out Microsoft could have an online strategy.

Is all of this mere speculation? You bet. But it wouldn't be all that surprising either.