yahoo down.pngWhen Microsoft withdrew their bid to acquire Yahoo back in May, while it may have appeared it was over between the two companies, it really wasn’t. Now we can finally say it’s over, and Microsoft and Yahoo have parted ways. They realized neither a full or partial acquisition would come from their talks, and so both have walked away. While Microsoft walked right back to Redmond where they came from, Yahoo on the other hand, walked to Mountain View, California where they inked an advertising deal with Google.

It’s not that the advertising deal between Yahoo and Google comes as a surprise because we knew they were trying to work out a deal. What comes as a surprise though is that Yahoo actually followed through. This move leads us to believe that they are not very confident in their own abilities and feel they must rely on Google to be successful. Now AdSense ads will run alongside Yahoo search results in both the United States and Canada, a move that should bring in an extra $800 million.

When news broke that Microsoft had walked away for good and that Yahoo would be partnering with Google, their stocks went sailing down. It dropped about 10% yesterday and has already started down again today. went as far as to say that Yahoo is “Damaged Goods” now that co-founder and CEO Jerry Yang wasn’t able to make a deal with Microsoft. They said, “The Google accord may make Yang more vulnerable in a proxy fight against billionaire investor Carl Icahn, who says Yang botched the Microsoft negotiations. Even if shareholders opt to replace the company’s directors with Icahn’s candidates, Microsoft is no longer showing an interest in buying Yahoo.”

There’s gotta be some good news from all of this, right? Well there is. The first bit of good news is for Google investors. Analysts are saying people are going to be pushing more money into Google instead of risking their money with Yahoo. The other bit of good news is for Yahoo Messenger and Google Talk users. The deal between Yahoo and Google just isn’t about the ads after all! In the official Google Press Release announcing the advertising deal with Yahoo, they say, “In addition, Yahoo! and Google agreed to enable interoperability between their respective instant messaging services bringing easier and broader communication to users.” This makes Yahoo Messenger even more valuable now that they have partnered with both Google and Microsoft (with Windows Live Messenger).