Yahoo!'s Brainpower

"There's a tremendous opportunity here to address the mass consumer that has never really happened before in history," he says. "We get to study data and networking effects that show how people catch on to trends. And we get to study how to monetize all this, so there's an economic angle as well."

So, while Google workers may be feasting on arugula with dried apricots and capelin pesto, Yahoo!'s researchers are pigging out on deep data showing how online communities are built, how consumers open themselves to the long tail of entertainment niches and why sensible people would create and publish content without being paid a cent for it. Those questions are tightly woven with search technology, but extend well beyond it.

As a result, Yahoo!'s research, despite its relatively lower profile to date, is catching the eye of some on Wall Street, who see its potential leverage in future growth.

"Search is Google's sweet spot, but Yahoo! has a relationship with its customers and Google does not," says Scott Devitt, an analyst at Legg Mason, which has no underwriting relationship with either company. "I rate Yahoo! buy and Google hold, and the most relevant reason is the relationship and data that Yahoo! has with its customer base."

Yahoo! is also trying to get another edge by building stronger relationships with academic institutions like Berkeley. Whereas Google has longstanding ties with Stanford and contacts at a variety of top universities, Yahoo!'s making deeper inroads into academia with formal relationships.

In a nondescript office building in downtown Berkeley, a quarter-mile from the outskirts of the University of California, Yahoo! is starting an experiment that may have a significant impact on its future strategy. It's partnered with Professor Marc Davis, who came to Berkeley from MIT's pioneering Media Lab, to collaborate on work that Davis began in his Garage Cinema project.