Yahoo! Finds a Mobile Home

Typing in "apple" on a Google mobile device, on the other hands, draws up a list of links, the first among which is to the company's Web site. While that's fine for a PC-based user, it's less useful to a Web surfer than taking a guess based on the context of the search.

"This is a big move for Yahoo! and goes against the notion that Google is ahead in every way," said Tim Boyd, an analyst at Caris & Co. "When you look at Google's approach, it's not really differentiated from the way they do search on the PC."

Boyd said the next logical step for Yahoo! is to push mobile hardware markers to include the service as a default on their devices. But that will not be easy, given how hotly contested and highly lucrative the mobile space is expected to be. Google CEO Eric Schmidt has repeatedly talked up the prospect of mobile search as of late. He revealed during the company's fourth-quarter conference call with investors that Google had evidence that revenue there dwarfed that of PC-based search.

Google's obvious focus on mobile search and reputation as a generous business partner may make mobile device makers think twice about getting too close to Yahoo!, Boyd says. That's especially true now that search providers often have less power than the partners providing them traffic, as was recently illustrated in the back and forth between Yahoo! and AT&T(T Quote).

Google, for its part, can hardly be expected to stand still. During the company's last conference call with investors, the company said it is investing heavily in mobile technologies -- but that investors should not really expect to see the impact on its financial performance from mobile until 2008.

And while it doesn't have Yahoo!'s content reserves, the amount of cash it brings to the table will make it a keen competitor.