Research firm IDC says that Microsoft's proposed takeover of Yahoo is the right combination to take on search heavyweight Google.
"IDC's data on online search behaviour and advertising revenue shows that a Microsoft-Yahoo merger creates a credible challenge to Google's web hegemony," according to the IDC report.
"Together, Yahoo and Microsoft command 22.7 percent of the online advertising market share [in the US], in contrast to Google's 32.5 percent."
IDC is owned by International Data Group, which is also the parent company of PC Advisor.
Regarding display ads, for example, adding Microsoft's share will make Yahoo's position as the market leader hard to beat, the report said. In addition, IDC said the takeover of Yahoo could be bolstered by Microsoft's planned $1.2 billion acquisition of Norwegian enterprise search firm Fast Search & Transfer ASA (FAST).
"If we consider a Microsoft-Yahoo-FAST combination, Microsoft is largely a business-oriented software vendor, [so] it makes sense for them to get into the business of selling infrastructure software or middleware to businesses that want to monetise their audience and their content," the report said.
However, even a Microsoft-Yahoo merger couldn't compete with Google in online video, IDC conceded.
Further, IDC said Microsoft and Yahoo would have a better chance of taking on Google together than they would separately.
"Without combining forces, Microsoft and Yahoo would only catch up to Google in the long run [five-plus years], and only if the stars aligned in the right way. With a merger, that goal is much closer," the report said.