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Yahoo's mobile promise

Company's emerging mobile business isn't likely what's driving Microsoft's bid, but Yahoo's early strides in mobile could be a nice strategic bonus down the road.

Microsoft's $44.6 billion bid to buy Yahoo is clearly a move to thwart rival Google from taking over the entire Internet, but such a deal also could give Microsoft a huge boost in the mobile market.

It's ridiculous to think that Microsoft would put together a deal of this magnitude for Yahoo's mobile assets alone. There are obviously other more pressing synergies and tie-ups between the companies. But the mobile piece of the story could be a nice added bonus that could pay huge dividends in the future.

Mobile is the next frontier for Internet companies. Nearly 3 billion people worldwide use cell phones today. That's nearly triple the number of people who have computers, so it makes sense that Internet companies like Google, Yahoo, and Microsoft would all see opportunity here.

And so far, each company has been taking stabs at addressing the market. Google offers its search and mapping applications on cell phones to help people find restaurants, movies, and shops when they're out and about.

But Google's long-term strategy appears to be one that takes more ownership of the services and devices in the mobile market. In November, Google announced Android, a new software development kit for cell phones that will essentially provide a new operating system and user interface tied closely to Google applications. Google is even bidding on wireless spectrum in a Federal Communications Commission 700MHz auction, in a move that could pit the company against cell phone providers like Verizon Wireless and AT&T.

Yahoo is also gunning for the mobile space. And the company has made significant inroads. Like Google it has adapted some of its traditional Web services, like search, for the mobile market. And it's done very well here. The company was ranked as the top Internet wireless Web brand in 2007 with more than 16 million unique visitors per month, according to Nielsen Mobile. Google held the No. 2 spot with roughly 11 million monthly visitors. And MSN came in third with more than 9 million.

Yahoo recently redesigned its mobile home page and announced Yahoo Go 3.0, which is open to widgets created by outsiders. It's also been rolling out new partnerships for mobile advertising. For example, Yahoo recently expanded its relationship with AT&T. The companies had originally teamed up on broadband services a few years ago, but now that relationship is extended and Yahoo will be providing search and display advertisements on PCs and mobile phones. This is a huge win for Yahoo because AT&T is the largest cell phone provider in the U.S. The company is also delivering display ads to Vodafone and T-Mobile in Europe and Rogers in Canada.

Yahoo's current mobile applications, plus its partnerships with carriers could complement Microsoft's mobile strategy very well. Microsoft has already been moving in this direction and has acquired some companies along the way that will allow it to bulk up its mobile offering. In March, it bought Tellme Networks, which provides voice services for nationwide directory assistance, enterprise customer service, and voice-enabled mobile search.

Combined Microsoft and Yahoo could be a strong force against Google. And a unified force could provide an opportunity to take back some dominance from Google. But then again Google overtook these companies once before, and there's certainly a chance the company will become the dominant player in the mobile Web as well.