So what do we call the new search partnership? Microhoo? Yahsoft? No, we should just call it Microsoft because, despite Yahoo! CEO Carol Bartz's brave words at the early morning conference call, this partnership really is all about the Redmond software behemoth.

Steve Ballmer, Microsoft's CEO, has been desperate to find a way to take on Google in search - the cash machine that gives Larry Page and Sergey Brin billions of dollars to innovate at will - and Microsoft has spent billions on search technology and much energy courting Yahoo! over the past few years.

Those efforts failed. Google has surged ahead in search and Jerry Yang, Yahoo! co-founder and CEO, rebuffed Ballmer's overtures last year. But things are different now. Bartz has been in charge for six months and Microsoft has a search product worth building on.

Bing, launched in June, has been getting mostly positive reviews and picking up slightly more traffic with the help of a $100 million marketing campaign. Analysts believe Bing's successful debut pushed Microsoft to reopen negotiations so it could expose its search engine improvements to a wider audience more quickly.

Now all those people that use Yahoo! web sites (and around half the internet users in the world do) will have their searches powered by Bing. They may not notice - it is likely there will only be a little "powered by Bing logo" somewhere but Microsoft gets access to the data on users' searches - which yield insights that can be used to pick out ads more likely to pique a person's interest. The value of that information is why Microsoft wants to process more search requests.

Crucially Microsoft has not had to pay Yahoo! upfront for this access - something Bartz had been pushing for - and investors have reacted to this disappointment accordingly today, sending Yahoo! stock down sharply.

The other crucial part of this deal is that while Yahoo! will run the sales force worldwide for both companies’ premium search advertisers, the self-serve advertising for both companies will be fulfilled by Microsoft’s AdCenter platform, and prices for all search ads will continue to be set by AdCenter’s automated auction process. This means Microsoft controls the important long tail of online advertising for small and medium size businesses - one that will grow with importance as automation improves.

In the longer term, make no mistake, this deal does not bode well for Yahoo!. There is much talk of Yahoo! becoming another AOL, a portal company that everyone uses but is one step behind on innovation and one that becomes increasingly irrelevant. True, Yahoo! still has its email, instant messaging and display advertising businesses but it is difficult to see where Yahoo! goes from here, where the big new source of online growth will come from.

Meanwhile we should hold a brief wake for all those years and billions of dollars of innovation from Yahoo! in search. While Google has ruled the roost for much of the last decade, we should remember with affection the role Yahoo! played in setting up internet search. And we should also remember that recently Yahoo!'s efforts at innovation in search have not been half bad. Yahoo! now has little incentive to invest further in search - some search engineers are to be laid off - and we can expect it to wither on the vine.

Meanwhile no one should get carried away by the combined strength of the Microsoft Yahoo! search partnership - even in the US where the combined market share is around 30 per cent, Google is still way out in front. In the rest of the world, including the UK, the combined market share of the two is around only 10 per cent.

Given these market shares, I am not sure that the US regulators are going to get that concerned about the partnership. The companies will give antitrust regulators time to review the proposed partnership's effects on the internet ad market and then it will take time to stitch together their different technologies.

Google will doubtless do its best to make the antitrust scrutiny as uncomfortable as possible and will enjoy the shoe being on the other foot for a change. The US Justice Department spent five months dissecting a proposed search advertising partnership between Google and Yahoo! before concluding that it would give Google too much control over the market.

Under the Obama administration, the Justice Department is promising to pore over technology deals far more rigorously than it did when the proposed Google-Yahoo! partnership came up.

Ballmer said in the conference call he expects the support of online advertisers and web publishers who would like a stronger rival to Google to eclipse any objections that Google might raise. I agree.

Ballmer and Bartz have posed together for some rather spooky publicity shots at Yahoo!'s headquarters (and there is an even odder website choicevalueinnovation.com) but to my mind Ballmer is the one looking like the cat who has got the cream.

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