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Is Yahoo, Microsoft pact bad news for Google?

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The aftermath

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So how will the next few months shake out?

Well, as the Wall Street Journal reported early this afternoon, the deal is likely to face serious scrutiny from regulators. "The Justice Department will look at the deal carefully to be sure it doesn't harm competition by allowing two top Internet companies to team up," Fawn Johnson at the Journal writes. "The agreement also could receive attention overseas. The European Union has fairly broad powers to examine deals that involve potentially restrictive business agreements, and it also reviews mergers and joint ventures."

Meanwhile, the deal received a lukewarm reception on Wall Street. Shares of Microsoft stayed relatively level, but shares of Yahoo tumbled significantly, falling at one point by as much as 11 percent. Investor concerns center on the lack of an upfront payment from Microsoft to Yahoo – a payment that many had seen as a precondition for any agreement.

The giant weighs in

What does Google think about the whole arrangement? For now, at least, the company said it welcomed the partnership. "There has traditionally been a lot of competition online, and our experience is that competition brings about great things for users," Google spokesman Adam Kovakovich told Reuters.

Kovakovich, of course, is speaking from a position of strength. What will happen if "Microhoo" begins to nip at Google's heels? Shar VanBoskirk, search-market analyst at Forrester Research, told CNN that even if Microsoft doesn't unseat Google, the pact will be good for advertisers and consumers.

"Overall, the deal makes sense," VanBoskirk said. "It potentially creates synergies between the two firms – each had a gap the other one could fill – to create another one-stop-shop and a stronger second-place player."

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