Over 3 months after making a $44.6 billion bid for Yahoo, Microsoft has decided that ‘clearly a deal is not to be done’. Microsoft’s latest bid which upped the total price to $47.5 billion over the weekend, was rejected as inadequate.

So what does that mean? For one, it means I was wrong to expect that an 80% premium would be enough to convince Yahoo. And more importantly, it may mean that both sides didn’t want to do the deal – which may be a good thing. Both sides have had over 3 months to get feedback from analysts, employees and even competitors as to the value of the merger, and if the point was to take on Google – they may have both figured out that this might have been a disaster.

From an online advertising standpoint, it will mean:

• Google will get even stronger, especially in the short term
• Yahoo might get better and be willing to change dramatically because of the scrutiny
• Microsoft will have to grow this part of their business themselves and get better at it.

For us and advertisers, I think this will mean we will have a more vibrant search engine marketing and online advertising industry. More competition usually means more innovation, choices, and lower pricing. It will take some time to get there and it may hurt these industry giants but in the longer term, the rest of us should benefit.

One thing is certain. Online advertising and marketing are BIG, and getting bigger. If you haven’t already, hitch your wagon to it.