Let's face it. Yahoo! is at best a very far distant second (12.8%) to Google (62.4) in the search engine world, and it would be disingenuous to call Yahoo's future anything but the equivalent of the Internet's "long goodbye". Google's grabbing more and more of their share of ad revenues too. That's why Microsoft's now withdrawn offer to buy Yahoo seemed such a good deal for both. Yahoo would no longer have to face competing with fierce Google on its own and Microsoft would greatly accelerate their standing in the search and online marketplace.
But Yahoo CEO Jerry Yang has been hell bent on swallowing any and every poison pill possible that would leave a disgustingly bad taste in the mouth of Microsoft since their offer in January. Yang even rejected a $5B offer increase. The most disastrous move would be making Yahoo's experiment outsourcing paid search terms to Google, which undermine's Yahoo's own revenues and fundamental business. That's how bad Yang didn't want a deal with Microsoft.
So you have to ask, what's Yahoo's future now? Yahoo's experienced a nice stock price bump in the short term thanks to Microsoft's unsolicited offer. That won't stick unless Yahoo succeeds in convincing the market that it's ultimately worth the inflated price now that the Microsoft offer is gone.
What's exciting and new at Yahoo? Not much really, just more treading water to try and hold onto their market position. Yes, there's some anticipation of new offerings like Yahoo's own Platform-as-a-Service (PaaS) offering, but again this is a catch up move to Google's App Engine and other PaaS offerings. Unless Yahoo comes up with something really valuable and unique, it will be another so-so effort and pass with little meaningful impact.
As you can tell, I think Yahoo lost a great opportunity to take on Google in a new, strongly strategic way by combining with Microsoft.
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What of Microsoft's plans?
They must have had some pretty serious plans to spend that much on Yahoo only to have it fall apart.
What's their backup plan?
Plus, this doesn't have anything to do with search, Google owns that and everybody except iaci know that, this is about web2.0 stuff, yahoo leads google in terms of community oriented items. You look at their email and financial stuff and google has better data intelligence but yahoo has a much more refined web experience. Yahoo and Google getting together makes more sense than Yahoo getting with microsoft.
MS's backup plan
MS's backup plan is simple. Push Live Search as hard as possible and let Google eat Yahoo's lunch. Then pick up Yahoo cheap after their stock falls into the stock market basement.