Microsoft-Yahoo deal makes good sense

Microsoft's deal with Yahoo makes a lot more sense than the one it was panting for 18 months ago.

Back then, Microsoft wanted to buy Yahoo outright for $47.5 billion. Microsoft has been a fountain of wealth, but it takes effort even in Redmond to pile up that much money. In hindsight, CEO Steve Ballmer must be glad Yahoo had a financial ego so inflated that it demanded even more than $48 billion. Now Yahoo is worth less than half that, and Microsoft has been able to get what it wanted without having to buy any Yahoo stock at all.

Under the deal announced last week, Microsoft will license Yahoo's search technology and take over the further development of it. Yahoo won't develop search technology anymore. Instead, it will market Microsoft's engine to premium advertisers. The two companies will not merge, at least not with this agreement, but will combine forces against Google.

We hope this works for Microsoft. For the second- and third-place companies in search to team up against the company with two-thirds market share is more likely to serve the public interest than for the top two to team up against everyone else. That was the proposal afloat a year ago, which prompted even the Bush antitrust regulators to step on it. We assume President Obama's Antitrust Division would be no less zealous.

There remains the issue of all these companies providing a "shelf" on which to stack content they didn't create and don't own. The shelf providers and the content providers need to reach an arrangement.