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Monday , May 12, 2008 at 2133 hrs Rather as John McCain cannot be displeased to have seen Hillary Clinton and Barack Obama fighting it out, Google has for the past three months enjoyed watching its only two serious rivals, Yahoo! and Microsoft, tear each other to pieces. Yahoo!, once an internet pioneer, has fallen far behind Google in web search and related advertising. Microsoft still dominates desktop computing but lags behind Google as software moves online. So Steve Ballmer, Microsoft’s boss, dared ask Yahoo!: what would be wrong with making, if not exactly a dream team, at least a joint effort out of it?

But on May 3rd, after a frustrating marathon of meetings, Mr Ballmer walked away. He had raised his offer for Yahoo! from an initial $44.6 billion on January 31st to about $47.5 billion, some 70% more than Yahoo!’s value at the time of the opening bid. Jerry Yang, Yahoo!’s co-founder and boss, wanted at least $5 billion more. Mr Ballmer wrote him a bitter letter saying that “you and your stockholders have left significant value on the table.” Wall Street’s verdict, on May 5th, was to cut Yahoo!’s value to $34 billion.

That the sell-off was not even worse primarily reflects the possibility that a deal may yet happen. Another software company, Oracle, recently dropped a bid for a smaller rival, BEA Systems, after its board rejected the offer, but had its way after BEA’s angry shareholders forced their board back into negotiations and a sale. Mr Ballmer’s farewell letter to Yahoo!, by recapitulating the negotiations in all their embarrassing detail, provides just the sort of fodder for Yahoo!’s investors to order Mr Yang to resume talks.

Mr Ballmer took particular pains to criticise Yahoo!’s readiness to “make Yahoo! undesirable as an acquisition for Microsoft.” By this he means Mr Yang’s apparent plan to outsource Yahoo!’s search-advertising technology to, of all people, Google. In a purely mathematical sense, this could indeed make Yahoo! somewhat more valuable. Google is better than Yahoo! or Microsoft at placing relevant ads next to search results and collects more in revenue for each resulting mouse click.