Google in driver's seat after Microsoft-Yahoo bust

By Michele Gershberg - Analysis

NEW YORK (Reuters) - Yahoo Inc may not be celebrating the end of takeover talks with Microsoft Corp, but their mutual rival Google Inc should feel free to pop the champagne cork.

The rift between Microsoft and Yahoo leaves the online advertising market wide open to Google's expansion. What's more, it puts Google in the coveted position of deciding the fate of its closest rival, analysts said.

Microsoft withdrew a $47.5 billion offer for Yahoo on Saturday after the Internet company dug in for a higher price.

Yahoo investors see only two viable options -- returning to negotiations or letting Google serve up some of its search listings since it makes more money off the ads.

With Microsoft holding firm for now, that leaves Google in the driver's seat when it comes to determining Yahoo's fate.

"It's good news for Google. They will continue to grow their dominant share," said Jane Snorek, senior technology analyst at First American Funds. "In the long run, I just think the Yahoo customer would go directly to Google."

Google and Yahoo are still working out the details of a potential search deal and are sharing the plans with antitrust regulators to dispel concerns, a person close to Google said on Monday. But no final agreement has been reached yet.

A deal be would icing on the cake for Google, adding about $1 billion in annual revenue and about $1 to earnings per share, assuming a 50-50 split on ad revenue, Snorek said.