Microsoft is big and has stakes in many aspects of Information Technology, while only a chunk of the company is into online entertainment and search. Given the leadership position that Google commands in the search industry, it is all the more rational for Microsoft to acquire Yahoo!. While Yahoo! itself has not been at its best this year as far as performance is concerned, not to mention the infamous expected layoffs, now Yahoo! seems to be on its way to fine tune itself. An acquisition by Microsoft at this stage would mean integrating with a more efficient company.
Since Google, MSN and Yahoo! are the biggest players in the search industry a conglomerate of the two biggies should certainly change the face of search industry as Loren Baker observes.
Live Search would be overshadowed, rather replaced by Yahoo! Search, as the latter is technologically superior and is better branded and positioned, than the former.
On the marketing front, Microsoft harmed itself by floating and branding the search engines on two fronts (Live Search & MSN Search), as the move negatively impacted its market share in addition to confusing the users. Yahoo! has been better at monetizing organic search with paid inclusion.
On the technological front the blackhats and spammers, perhaps find a safe haven at Microsoft search compared to Yahoo! or
even Ask.com. Moreover, the R&D at Yahoo! Search is quite impressive and Microsoft should be able to reap quite a few benefits here too.
As far as SEO is concerned, there should then be two big engines for users to choose from Google and (Microsoft + Yahoo!), Ask.com might have to ramp up its operations and adapt new tactics, a merger of its own perhaps. Further, the affiliate marketers who've been fortunate with the poor rankings of Microsoft are likely to take a hit, and may not have the requisite search market share to rope in business.