Make no mistake, Microsoft is here to stay. That statement is borne out by the fact that Redmond released its digital music player Zune even though it was aware that the device would be soundly beaten by Apple's iPod. Microsoft has now turned its attention to Google and its massive presence in the online advertising market.

The online advertising market is worth $40 billion at present and is expected to double in just over three years. Microsoft is nowhere near Google in terms of paid revenues as far as search is concerned. Plus Google's AdWords and AdSense advertising programs have taken the market by storm.

Teaming up with Yahoo is a logical step for Microsoft. What's more; its a necessary one. Redmond risks being rebuffed and losing face here. But the fact that Steve Ballmer and Co do not mind this highlights the fact that Microsoft needs Yahoo if it is to gain some foothold in the booming advertising sector.

The New York Times reported today that Google is looking to use the anti-trust card to stop Microsoft from getting Yahoo. Other suitors were being lined up, but the really big ones like News Corporation, Time Warner, AT&T and Comcast are not interested - at least at this initial stage.

David Drummond, Google’s senior vice president and chief legal officer is up in arms against the proposed merger. Writing in Google's official blog, he queried, “Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?”

No doubt, a Microsoft-Yahoo wedding will be scrutinized by almost all competition watchdogs, but it must be remembered that Google itself is the king of paid search and cannot argue that Microsoft will hinder competition if it acquires Yahoo.

Statistics are firmly on Google's side, which is why Microsoft is betting that any competition enquiry will be ruled in its favor. The last has not yet been heard in this "proposition." Watch this space.
 

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