Why Microsoft Needs Yahoo!

But advertisers complain that Microsoft's dearth of Web traffic stops it from ultimately driving as many potential customers in absolute numbers as the advertisers would like.

The stakes were raised to another level last week when Google unveiled its Google Apps Premier Edition service, a suite of hosted software that replicates many of the things that Microsoft's Office suite does. And while Google's service, which will cost $50 per user account per year, comes nowhere near the $12 billion in annual revenue Microsoft rakes in courtesy of Office, it does present Microsoft with a real reason to worry.

As tech blogger Om Malik has pointed out, Google's game plan is not so much to fill its coffers immediately as it is to put Microsoft on the defensive. "Google's strategy is to totally commoditize the market, try and take away pricing power from Microsoft, and try and put the megabillion dollar a year 'Office' business division on the defensive," he writes.

With a viable alternative to Microsoft at hand, potential customers will be in a much stronger negotiating position, and Microsoft will have a tough time justifying higher prices.

That will make the situation especially tricky for Microsoft, a company that desperately needs to show Wall Street where future growth will come from. With the lackluster launch of Vista and with its Office gravy train facing a more difficult environment ahead, the logical thing for Microsoft to do is to muscle into the rapidly growing Internet search business.

Yahoo!, which continues to operate some of the most-visited sites in the world and ranks a solid No. 2 in search queries, presents Microsoft with an attractive way to quickly become a player in a market where it desperately craves a bigger presence.