• Silicon Alley Insider, Monday, May 5, 2008 11:02 AM

So Microsoft called Yahoo's bluff and walked away.Yahoo now has no other recourse but to do everything in its power to secure a Google deal. Given Yahoo's (read: Jerry Yang's) obsession with remaining independent, a Google outsourcing deal makes sense because it allows Yahoo to focus on battles it can win, "instead of throwing money at a war it has already lost."

Since Yahoo has already lost, its only concern should be user query share. Yahoo's share is already down to 20% and will probably continue to fall no matter how much money the company throws at Panama, its search technology platform.

Unless CEO Jerry Yang thinks that Yahoo can somehow recoup search share by continuing to invest in Panama-and the answer should be "no way"-then Yahoo should simply dump the expensive technology and outsource to Google to get as much profit as it can while it still has search share. This, by the way, is what AOL did, and even though AOL continues to lose share, at least it does so while maximizing its profit.

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