Seems that things are going through for an alliance between Microsoft and Yahoo!

http://tech.yahoo.com/news/ap/200907...icrosoft_yahoo

Both have been loosing ground to Google and they are both hoping that an alliance will get some of their ad revenue back.

They will still use Yahoo!'s web design, but the backend is now going to be Bing! Microsoft's search engine. Bing is about as same power as the Google search algorithm.

Google still has some major advantages though: power. Google has millions of processors handling all of their searches, far more than Microsoft and Yahoo put together. Their algorithm may be the same n order as Bing, but spread over much more processors. In a recent presentation, Google said that every single query uses 1000 processors.

Developers. Google's summer of code takes the best student developers in the world and pumps out experimental code, some works some don't. This makes their R&D cheap and efficient.

Trust. When a small developer comes up with something really great, they will always go to the company with a track record of being fair. Microsoft has screwed people and companies time and time again, either stealing code or buying it for a fraction of what it's worth. This means that new technology goes to Google first.

Yahoo and Microsoft have an advantage over Google though. Marketshare. Windows has over an 80% marketshare, by default IE8 with a default homepage of MSN (which I assume will be changed to Yahoo) is what people first see. Non tech-savy people don't bother upgrading to Chrome or Safari where Google is the default engine.