Yahoo's farewell to search

With Yahoo bowing out of search technologies, it needs to assert its identity — or die

Jerry Yang's requiem is in a minor key. Microsoft's $47bn takeover now seems an impossible fantasy: in its place, Yahoo has given up search in a 10-year deal that'll see at most a quarter of that amount.

And it is a full retreat: if Yahoo wants to remain in the search business after this deal, it has to agree to whatever terms Microsoft sets, or start from scratch. The internet makes no sense without search, and for Yahoo, search now means Microsoft.

As Microsoft is fond of saying whenever it wipes a competitor off the map, competition is good. There's no evidence Microsoft and Yahoo together will be more of a competitor to Google than Microsoft and Yahoo apart, and although Ballmer said that the extra traffic will be advantageous for targeting behaviour and generating algorithms, he didn't mean it. If he did, he's ceding Google that advantage in perpetuity.

But there are good things to come. It is important for the industry as a whole for Microsoft to break its dependence on desktop and server revenues and become freer to co-operate, innovate and take interesting risks. It is important that Google has strong, well-resourced, determined competition, even if that competition has yet to prove itself.

And it is important that regulators, customers and developers recognise that the battle for domination has moved off the desktop and into the cloud: it's no wonder Microsoft is more relaxed about a choice of browsers on the desktop, if it can now bot-herd the mass infestation of Yahoo taskbars.

What of Yahoo? As the 10-year time bomb starts ticking, it's free of the burden of search and has some leeway to recreate itself. It may be that Carol Bartz and her team have an answer in mind to the question: 'What does Yahoo do next?' that will be more attractive to investors than 'slowly divest itself until there's nothing left' — if so, let's have it.

Let's also hear what's happening to Yahoo's various search-related technologies, such as Pipes and Boss, which still have exciting potential in an open, cloud-based future.

Of all the outcomes in this long saga, this is one of the best for Microsoft — which got what it wanted at a cut price and without any serious antitrust issues — and distinctly dour for Yahoo. For the rest of us — from Eric Schmidt to Aunty Freda — the answer we're searching for is "wait and see".