So much for not going a dime above the original offer, as Microsoft claimed when Yahoo! rejected its initial offer. Major news sources are now claiming that Microsoft has upped its offer by “several dollars” in an attempt to finish the deal with Yahoo! as soon as possible. Yahoo! turned down the first offer, considering it to have undervalued Yahoo!. However, it will be hard for Yahoo!’s board of directors to turn down the second offer as Yahoo! has not exactly been setting the world ablaze with their performance in the past few quarters.

For Microsoft, this shows a high degree of desperation to compete with the almighty Google in the search market. Google has singlehandedly dominated both Yahoo! and Microsoft over the past years, and there doesn’t seem to be any indication that will change, regardless of Microsoft-Yahoo deal. At the same time, Microsoft can not lose this opportunity to mount a meaningful challenge against Google. Steve Ballmer has claimed numerous times that he could do without Yahoo! if Microsoft’s offer for Yahoo is rejected, but deep down he knows that without Yahoo! Microsoft will have a very small chance of challenging Google. But here is the catch. Even with Yahoo!, Microsoft will not be able to kill off Google. Besides, one has to think about the challenges that this acquisition will cause for Microsoft (e.g. integration, employee retention, clash of cultures).

For what it’s worth, it’s more intriguing to see Yahoo and Microsoft combine forces against Google. It will probably push Google to be even better than they are today. But with only two major entities going at each other, we are left with almost a duopoly. More competition always help, so it’s a shame to see the likes of Ask! throw in the towel.