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Now it's all on Jerry Yang's shoulders

If Yahoo CEO's gambit fails, he's gone. If it succeeds, he'll be feted as the second coming of Lou Gerstner.

Now it's make-or-break time for Jerry Yang.

Yahoo CEO Jerry Yang CNET Networks

If his gambit succeeds, Yang will be feted as the second coming of Steve Jobs, reviving the glory of a one-time technology bellwether. If not, he'll join Terry Semel and Tim Koogle on the roster of failed Yahoo CEOs.

Earlier Thursday, Yahoo announced that Microsoft was no longer interested in pursuing a deal. Into the breach steps Google CEO Eric Schmidt with a search advertising arrangementthat could be worth as much as $800 million to Yahoo.

•  During the first year after implementation, Yahoo expects the deal to generate an estimated $250 million to $450 million in incremental operating cash flow.

•  The agreement is nonexclusive. Yahoo can display paid search results from Google, other third parties, as well as its own Panama marketplace. (Here are more detailson Yahoo's search ad-pact with Google.)

After all the "sturm und drang" revolving around a possible Microsoft deal, this much-rumored Google tie-up comes as a bit of an anticlimax. But at least Yahoo has chosen a direction, moving beyond the endless muddling of the last five months.

Steve Jobs: Been there, done that Dan Farber/CNET

Yang's immediate task is to find a way to sell the Google deal to regulators. The agreement won't officially kick in for another three and a half months because of antitrust sign-offs. Yahoo can probably persuade Washington to give the green light.

Some will dismiss the deal as an acknowledgment that Yahoo wasted millions of dollars developing its Panama search advertising platform (not to mention the $1.6 billion it paid in 2003 to buy Overture Services). There's some truth there but it may be too harsh a judgment. Besides, the Google arrangement may turn out to be a clever move if it fosters the two companies' respective strength in search and display advertising.

Whether Carl Icahn and the investor class agree--we'll know Friday morning when Wall Street opens up for business. Icahn could do nothing Thursday but count his losses as shares of Yahoo plummeted after the company announced the collapse of the Microsoft talks. If the Google deal fails to do much to revive the stock price, they'll naturally call for Yang's scalp.

Of course, that goes with the territory. Yang never wanted to see Yahoo get swallowed by Microsoft. He wanted the opportunity to direct the turnaround, and now he's got his wish. Is Yang equal to the challenge? Beats me. He's super-smart and knows the company backwards and forwards. But he is not a charismatic leader and he turned in an uneven performance on the conference call announcing the Google deal. He tripped over words and sounded unsure as he spoke, leaving No. 2 Sue Decker to handle the hard questions. I wouldn't read too much into appearances, but strong CEOs know how to put on a good show.