Yahoo (YHOO), which competes with Google (GOOG) and AOL (AOL) in the search business, is seeing a relatively stable profit margin of 42% since 2008 by our estimates, and we expect the margin to rise slightly over the coming years as Yahoo benefits from its partnership with Microsoft (MSFT). In 2009, Yahoo and Microsoft signed a deal whereby Yahoo will not only use Microsoft's search technology on its websites but will also keep a majority of the ad revenues. Yahoo is also making efforts to control costs by cutting its workforce, which should improve profitability in the short term.

Yahoo! Inc. (NASDAQ: YHOO) made the decision to use competitor Microsoft Corp.'s (NASDAQ: MSFT) Bing search technology soon to power the internet searches across its vast empire. That doesn't mean that Yahoo! still won't compete with Microsoft aggressively. After all, Yahoo!'s agreement with Microsoft is only to use the software giant's Bing search technology in the back end -- not in the customer's face.

Yahoo!'s Prabhakar Raghavan indicated that "It is our belief that the battle has moved beyond the back end ... what we do with it, how we paint it, how we render it, that's entirely up to us." This confuses the issue a bit but what he is saying is that Yahoo! will use Microsoft's technology, but will still heavily compete with the company in terms of customer-facing search market share. The thoughts of a Microsoft-Yahoo! full-frontal assault on Google Inc.'s (NASDAQ: GOOG) market-leading share won't really be positioned that way after all.

Even though Microsoft Corp. (NASDAQ: MSFT) had a not-so-hot latest quarter, the company still would like to partner with Yahoo! Inc. (NASDAQ: YHOO) for something. Although Microsoft CEO Steve Ballmer no longer wants to acquire Yahoo!'s entire business, you can bet something is brewing between the two companies almost 18 months after a fierce and unsuccessful effort on Microsoft's part to acquire Yahoo!

What would Microsoft want? After all, it has just launched its Bing search (er, decision) engine to great fanfare a few months ago. Bing's market share grew admirable after its release, so would Microsoft want any part of Yahoo!'s search business? Hard to say.

Yahoo! Inc. (NASDAQ: YHOO) won't be the default search toolbar on the Internet Explorer browser included on new Hewlett-Packard (NYSE: HPQ) and Acer computers soon, according to the company. With toolbars being a main way PC users use internet search, this could cost Yahoo! dearly.

Yahoo! and Netscape, oh my! Both are diving head first into the concept of "social search," integrating the mysterious ranking systems of the search engine with the cool democratic nature of the social bookmarking site. As Time Warner was preparing to launch its beta version of the new Netscape, Yahoo! was talking about integrating del.icio.us and flickr, two very very grassroots-y and user-driven properties, with the unknowable algorithms behind its search engine.

Jeff Weiner of Yahoo! says his social search will "tap the untapped authority of users" while Jonathan Miller of Netscape says "We want to marry the great editorial skill of humans and what systems and software can do to create something that is different and better."

These ideas are good and pretty but I have to wonder: how is this any different from how Google has given more weight to blogs in its search engines? How is this different from giving weight to incoming links (which are the most democratic of all democracies)? Yahoo! thinks I am the untapped authority, but really, I'm quite respectably tapped with some 8000 visitors a day to my personal blog: all through the power of my content. And I'm just the tip of the iceberg, other bloggers who fit the category are cashing checks from Google every month.

It's all lovely, and fun, and a good idea. But social search is just a new way of creating a network effect, and the end result will be no different whether you're getting popular through votes or links from your ever-expanding group of friends.