Google Vulnerable to Yahoo! Attack

Will CEO Carol Bartz's new and improved Yahoo! be able to give Google a run for its money?
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Updated from 11:59 a.m. EST

Will CEO Carol Bartz's new and improved

Yahoo!

finally give

Google

(GOOG) - Get Report

a capable adversary in the battle for Internet advertising?

Well, it can't do much worse than previous turnaround efforts by leaders like Terry Semel, Sue Decker, Carl Icahn and returning co-founder Jerry Yang, who all failed to reverse the years of steady declines in Internet searches.

The new Yahoo! chief is expected to outline her strategy as early as this week. But last month, even before Bartz was putting the final touches on the reorganization plan, Yahoo! was already stabilizing its standing against Google in the search business. Yahoo! managed to take a half percentage point of search market share from Google, a rare setback for the search giant. Google holds 72% of the market, and Yahoo! has about 18%, according to research shop Hitwise.

Fittingly, the two companies come to the arena from entirely different angles. Yahoo! has a collection of popular sites, and some of those people use Yahoo! search. Google, on the other hand, has one big draw: its fantastically popular search service.

Bartz highlighted this key distinction on an earnings conference call last month, promising to strengthen Yahoo!'s advantages. Citing U.S. numbers, Bartz said "Yahoo! exited the year with the top-ranked sites across 11 categories, including major destinations like our home page, mail, finance, news and sports. And users continue to spend more time on Yahoo! than anywhere else online."

If Yahoo! hopes to exploit its heavy traffic flow and capitalize on Google's weakness, one big player is still interested in helping.

Microsoft's

(MSFT) - Get Report

chief, Steve Ballmer, said Tuesday that he'd

like to talk with Bartz

about a search deal to better compete with Google.

Tough challenge. Google's search prowess has given it verb status -- "Google it" -- and established it as the default search among Internet users young and old.

"It will be difficult to catch up with, even if Yahoo!/Microsoft improve their search algorithms and reach par with Google, that may not be enough to sway consumers' away from Google," says Merriman Curhan Ford analyst Richard Fetyko.

"Consumers associate Google with search, but nothing else so far has struck that kind of bond, except perhaps Gmail," says Fetyko. "That's Google's advantage and curse."

Google shares closed Wednesday trading down 1.1% to 341.64. Yahoo! closed down 2.1% to $12.48.

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