Forget the new entity with a combined share of 27% of all searches. Forget Microsoft's $291.21 billion market cap. Google should be worried about a united Microsoft-Yahoo because of the touchpoints.

After all, Microsoft and Yahoo have a combined reach that includes nearly all PC desktops, two of the three most popular search engines, and a portals presence with a truly enormous reach. And so a joint Microsoft-Yahoo would be able to capture users at every stage of computer use, keeping those users away from Google all the while.

That should concern Google quite a bit, but I'm sure they are already quite aware of this threat; much of the problem was raised in its annual 10K report filed with the SEC in March.

Eyeballs from Portals

In that report, Google spells out several reasons why it needs to watch out for Microsoft and Yahoo, both of which tie for first place in its list of potential risks. The danger I'd like to discuss most is that in Google's words, Yahoo and Microsoft could "make their web search or advertiser services easier to access." That, Google says, could lead to "a significant decline in [Google] user traffic or in the size of the Google Network."

One way that threat could solidify actually comes from a danger Google highlighted separately. "Microsoft and Yahoo," the report reads, "...may have a greater ability to attract and retain users...because they operate Internet portals with a broad range of content products and services."

The second fear is related to the first. Since both MSN and Yahoo feature search bars on their portal pages, those portal pages also drive search traffic. Which is why the larger and more popular Yahoo and MSN make their portals, the greater they can extend the reach of their search bars -- and the more search share they're able to steal from Google.

So far, even with their massive portals, MSN and Yahoo clearly haven't stolen enough share of search to do any real damage to Google. But a combined MSN-Yahoo portal wouldn't just be massive -- it would be a portal on a scale we've never seen. That scale might be so enormous, it would allow MSN-Yahoo to start seriously chipping away at Google's traffic.

From Desktops to Search Engines

In the SEC report, Google also voices concern over Microsoft's "features that make web search a more integrated part of...Windows...and other desktop software products."

Google has good reason for this concern. It understands that you'll draw more traffic to your search engine if you can create easy access to it from their desktops. And Microsoft, the leader in desktop software, is clearly better-positioned than Google is to create that kind of desktop/Web search integration.

For just one example of how much Microsoft could do with desktop-based Web search, consider the ability to search on Live.com off of Microsoft Word. That's a welcome tool for people who tend to write and research at the same time -- a group that includes a very wide range of people, from college students, to journalists -- to, ahem, the occasional search insider writing about industry acquisition rumors.

Word actually does offer that feature already, although it's a feature that's buried too deeply within Word to be very practical. But it's not hard to imagine Microsoft prominently placing a Live.com search bar within the Word toolbar. And when that happens, expect a huge surge of traffic to Live.com.

Of course, Word is only one piece of Microsoft's desktop arsenal; and every one of those pieces can be integrated with MSN, and with Live search.

The One-Two Punch

As referenced above, the real danger to Google doesn't come from a combined MSN/Yahoo portal alone. Nor does it come from the Web/desktop integration that MSN can uniquely provide. The real danger to Google is the combination of these capabilities that MSN and Yahoo have, but that Google doesn't.

Combined, these synergies would let a combined MSN-Yahoo own the entire computer experience, from the desktop to the Web, without ever leaving the world of MSN-Yahoo. That's a potential that Google doesn't have today -- even if it does currently rule search.

Based on its own risk assessment in its 10K report, it seems to me that Google's aware of what MSN-Yahoo could really mean. And with the need to decide Google's next move, I wouldn't be surprised if Google execs didn't sleep as they had hoped to over the weekend.