Since thwarting recent Microsoft buyout and partnership efforts, Yahoo!’s stock price has sunk back to levels not seen since prior to the proposed alliance, a full 50% off of where it had reached during the height of buyout speculation. Yikes. Looks like Yahoo! shareholders were the big losers there.PPC Company

Perhaps it’s time for both sides to calm down, digest the situation and reconsider working together. After all, it sure looks like Yahoo! needs Microsoft’s help just as badly as Microsoft needs Yahoo!.

Let’s take a look at some recent search query data provided by Compete.com and see who really needs who here. When comparing June, 2008 search traffic numbers to those from June, 2007, there was a 12% decline in actual search queries performed at Yahoo! while Google realized a 44% surge in traffic; That is pretty staggering. Microsoft’s search queries increased, but very little. Based on the 9.1 billion searches performed in June, Google currently dominates search market share receiving 69% of all search queries, followed by Yahoo! with 19% and Microsoft with 8%.

Yahoo!’s one time search query empire has been gradually deteriorating as Google takes over the market. Yahoo! is dominant in other areas, but could certainly use strategic and financial support from Microsoft. Microsoft could be a great ally in trying to prevent Google from further expanding their reach into all areas of technology. I do not necessarily think a buyout is the best solution, though it might be, but I sure think a partnership like the one that had been previously discussed might be wise.

Microsoft needs to increase its Internet presence in order to survive in the future and Yahoo! offers a unique opportunity. Google is already encroaching on Microsoft’s core software business via their free online applications. Microsoft is well aware of Google’s threat in various areas and must do something soon. With Yahoo!’s stock price back to pre-discussion levels and the influence of Carl Icahn who now sits on Yahoo!’s Board of Directors, renewed talks would certainly not surprise me.

Google has already prepared an argument regarding the possibility of Yahoo! and Microsoft partnering, which is a bit ironic since Google has gone on to partner with Yahoo! themselves. We’ll still have to see if the Department of Justice decides to let that deal go through. Until then, I suggest that the powers that be at Microsoft and Yahoo! regroup and reconsider. Hey guys, you both need to do something. The Google Empire has arrived. Clearly, resisting independently has not been working. Perhaps it’s time to try something new.