Still, Google mobilized quickly to fight the proposed deal. The company's general counsel, David Drummond, publicly raised antitrust questions, citing Microsoft's past problems with federal charges of anti-competitive behavior.
"Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?" he wrote on Google’s official blog.
Google also started putting its bulked-up Washington lobbying operation to work.
"They approached me and said, 'We want your help stopping any deal,' " said Jeff Chester, executive director of the Center for Digital Democracy, a public interest group. "They dismissed my concern about their growth. They said, 'It's Microsoft.' There is no recognition on Google's part that they are an emerging digital monopoly."
More than the threat of a big lobbying push, Google's recent two-week test with Sunnyvale, Calif.-based Yahoo on search ads changed the dynamics of Microsoft's pursuit, said Scott Cleland, president of Precursor, a technology research and consulting firm. The test allowed Yahoo to say it had an alternative plan to increase profit, even if it came at the expense of a core business strategy.
In his letter to Yahoo Chief Executive Jerry Yang announcing Microsoft's withdrawal, CEO Steve Ballmer said a completed search-ad arrangement between Yahoo and Google would make an acquisition "undesirable to us."
Yahoo's failure to strike a deal with Microsoft infuriated some of its investors, who sent Yahoo's shares down 15% on Monday. Some are pressuring Yahoo to reopen talks with Microsoft, which had been willing to pay a big premium.
Google's triumph, at least for now, continued a string of victories. One was outbidding Microsoft for DoubleClick Inc., a leader in ad technology. Another was getting the Federal Communications Commission to require the winner of an auction for a major chunk of wireless spectrum to open its network to all services and devices. That move will boost Google's efforts to get into the mobile phone business.
"They are doing things that are giving them small victories, and small battles make up the war," Standard & Poor's analyst Scott Kessler said.
Google declined to comment. Its executives have said that dominance in an Internet business is never as solid as in retail or manufacturing, because competitors are only a click away.
