Google versus Microsoft in Yahoo buyout -- no matter what happens, Google wins

Google and Microsoft appear to be engaged in a high-stakes bidding game over who will buy Yahoo. But Google holds all the high cards; no matter which of the two ends up with the company, Google wins.

Google has met with two or more private equity firms to help with a bid for Yahoo, reports the Wall Street Journal today. And Microsoft has long been considering a bid to buy Yahoo in concert with the private equity firm Silver Lake Partners.

It's not clear whether Google really wants to buy Yahoo, or whether it only wants to jack up the price that Microsoft would have to pay for the company.

Why would Google want to buy Yahoo? There seems to be very little that Yahoo has to offer the search giant. But buying Yahoo would do one thing for Google -- keep it out of Microsoft's hands. Microsoft has a deal with Yahoo in which Bing powers Yahoo's search engine. Thanks to that, Bing now has a serious share of the search market, up to around 30%. That's a solid position, can attract serious advertisers, and is a good base for growth. If Google bought Yahoo and instead powered Yahoo search with Google's search engine, Bing would be in serious trouble.

So Microsoft needs Yahoo much more than does Google. And that's why Google wins no matter what happens. If all Google does is drive up the price by several billion dollars Microsoft has to pay for Yahoo, it eats into Microsoft's warchest. And if Google instead buys Yahoo, then Bing is endangered.

Because Microsoft needs Yahoo more than Google does, my guess is that Microsoft ends up with the company. But the company will end up overpaying, and Google won't have lost a thing.

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