Summary
Companies providing only Internet search do not have a long lifespan. Microsoft's main interest in acquiring Yahoo was not their Internet search technology but rather to use them in their fight against Google.
Analysis
Yahoo got started as a search engine, just like Alta Vista and just like Google. Out of these three (there are/were more) Alta Vista is the only one in this list that didn't go beyond Internet search and it is also the only one that doesn't exist anymore. The lesson here is that in order to stay in business you have to do more than just provide Internet search capabilities.
Early on Yahoo decided to become a portal with email, Instant Messaging, Flickr photos etc. etc. So Yahoo might be the RC cola of Internet search but it is number one in web based email and the truth of the matter is that people spend much more time looking at their emails then looking at their search results. In other words email web pages are a much better place to put ads in front of consumers then Internet search pages are.
Why else do you think Microsoft wanted to pay a hefty sum for Yahoo, it sure wasn't for their search technology. The real reason that Microsoft wanted Yahoo was so it could use Yahoo in its fight against Google. Without Yahoo, Microsoft decided to release their own Internet search technology called bing that now competes with Google search. And no, they will not be able to seriously damage Google's position as the world leader in Internet search, but it will keep Google on their toes, just like Google keeps Microsoft on it's toes with their Chrome Operating System.
For more on technology trends like this see my blog.
