For years now we've been wondering what Microsoft was going to do with that big pile of cash it's been sitting on. Now we know: Today the Colossus of Redmond set its sights on Sunnyvale's old-school giant, Yahoo! Or, as the Onion put it recently, maybe that exclamation point is deceptive.

See, things have not been going well for Yahoo. The company that pioneered the original mass-market search engine has long been displaced by Google. Its other business initiatives, focused around online community in mail, instant messaging, newsgroups, is getting surpassed the wave of comprehensive social networking sites such as MySpace (owned by Rupert Murdoch's NewsCorp), Facebook (which Microsoft now owns a stake in) and, to a lesser extent, LinkedIn (still independent, but for how long?) Last year, the company brought back founder Jerry Yang as CEO on the hopes that he could turn around the ailing veteran of the Internet. Yesterday Yang's plan involved 1,000 pink slips. Today, the plan now comes down to being absorbed by Redmond or seeking out a white knight.

Because, when you look at Microsoft's offer - $44.6 billion - you see that it's a 62 percent premium over Yahoo's stock price. It's an overpayment deliberately designed to shut out other would-be acquirers. Namely, Google.

Because ultimately, that's what it comes down to. Yahoo's search engine is a distant second to Googles (and Microsoft's a distant third). IM integration is likely to be nice, but no windfall. Putting the Yahoo and MSN homepage/personalization functions together makes more sense, especially if tighter integration with Facebook is in the offing.

But what it really comes down to is that Yahoo's most robust program is in advertising. Microsoft has seen that this is where the money is now. (It wasn't the case back in the dot-com era, when anyone dependent on online advertising got killed). Microsoft snapped up aQuantive last year for a cool $6 billion to give itself one of the leading providers of advertising technology. With Yahoo they'd get the network. Because Google is waaaay ahead of everyone else on this mark, primarily because, like its eponymous search engine, its so easy that its become an addition to the language. You Google things on the Internet, and when you want to make a buck, you use Google Ads. Simple.

There are many reasons why Microsoft's hostile takeover bid could go wrong - Microsoft just doesn't do "simple", for one, but that's for another post - and by betting the campus on this deal, it seems that Redmond is saying that it's this way or into the dustbin of history. Certainly Yahoo is an enticing target, and, aside from Google, which doesn't need Yahoo, there don't seem to be any likely white knights out there. But it's going to be a tough fight, and it's not clear who, if any, winner will emerge.