Just as in the “bricks” world, the “clicks” world continues to see merging and shifting and buyouts between companies in the Internet industry. A recent big change occurred in online search when Yahoo bought Overture for $1.6 billion.

This deal is setting up a battle between Google and Yahoo and may also trigger a renewed effort by Microsoft to build or buy its own search technology for MSN Search. Some speculate that the deal may also lead to a Microsoft buyout bid of Google.

Danny Sullivan, editor of SearchEngineWatch.com, took a moment to share his perspective on search engine wars, human-edited directories versus automated search results and who will win in the future.

Q: Did you see this deal coming with Yahoo buying Overture or were you surprised?

Sullivan: Surprised a little in terms of the timing, but not so much in terms that it makes sense for Yahoo to do it. There had been all sorts of rumors. It seems like Yahoo and MSN were daring each other to take the first step – but no one really wanted to make it.

Q: What do you think was the driving force with this Yahoo Overture deal?

Sullivan: The driving force is that Yahoo is carrying its future. They understand that search is valuable, if only for the dollars it can earn for them. They look at what many people would acknowledge is the most successful player – Google.com. I say they’re successful not in terms of money they’re earning, but in terms of the popularity of their search, people thinking of Google as a synonym for search.

Yahoo! has to be envious of this when you consider that was them at one point. People saw them as the king of search for a very long time. You look over at Google and you see they have their own technology to crawl the Web, good editorial listings, plus they have their own internal system to sell paid listings and make money and that doesn’t leave them dependent on a third party.

So Yahoo looks over at Overture and thinks if MSN buys them, then their competitor is out there in control of things. It’s better if Yahoo has them in-house. It’s just like earlier when they looked at Inktomi (search engine) and said they needed to have the editorial component in-house, so they made an investment in them.

Q: Do you think this change in Yahoo’s philosophy towards regular search was a confirmation of their error in view they saw in the market when they first started that things should be human-directed rather than automated searches?

Sullivan: No, I wouldn’t say that at all. In fact, the reason Yahoo is so popular today is they were the exception that went down the human route. If they have gone the other way, they might not be around. All the other people were crawling the Web, but technology was not that good when it came to general queries.

If you typed “travel” in Yahoo, because they have categorized the Web, that help to narrow in on something. If you do that on AltaVista, you’d get 12 million matches and who knew what came up! But the technology advanced and Google, when they started making better use of links, were able to give you highly relevant, automated results. That’s where Yahoo didn’t make the shift soon enough.

Q: The whole directory aspect is certainly going to exist at Yahoo, but do you think the Internet just got too big to index through human editors?

Sullivan: That’s part of it. Human editors are also expensive. You have 500 people you’re paying $40-50,000 per year. That’s something like $20 million. Although interestingly, Overture has an editorial staff as large as what Yahoo has. They still have to have all those humans to review the page listings for relevance. It is an issue that it’s hard for humans to keep up, but I like having humans in the mix.

To use a library metaphor, if you to go into a library and say you need some books on bed and breakfasts in Seattle, they might find one or two books for you and they would get that information just from the title of the book.

However, if the library told you that they scanned every page of every book on their shelves and here are the most important individual pages you will find of the very best on that topic, that would be superior to you. That’s what crawling the web and link analysis has really done for Web search at this point.

Q: Do you think this move could cause more consolidation? Is Microsoft making a bid for Google?

Sullivan: I’m sure it’s something they would have to consider. They would have to take a hard look and ask themselves why not. Everything they want to build, Google has – and it works. They can take the hard route and try to catch up or they can take the jump ahead and just purchased it. The question is would Google want to sell to them. Would it be worth the expense when you know that some people will suddenly not like you as much simply because they don’t like Microsoft.

Q: Would the Google search results would show up on the interest in results?

Sullivan: It’s important to remember that has not been successful for those who have tried it. Excite bought WebCrawler and basically one side gets to be the favorite child. Altavista rolled out their Raging Search, but that never took off. Lycos bought HotBot, and HotBot then got put on the back seat. They could go to the other extreme by keeping MSN the way it is but now it is “MSN powered by Google.”

Q: Will Overture lose all of its current customers, now being serviced by Yahoo, their biggest competitor?

Sullivan: The biggest one everyone worries about is MSN—and yeah, they’re going to lose MSN. They all know that going in and Yahoo said that’s fine if that happens. Yahoo is doing this for our own reasons.

To me that’s not just PR-speak. Google has its own program for its own needs. Distribution beyond Google is just icing on the cake. Who else are they likely to power? Well, they could duke it out with Google to power AOLSearch. Will AOLSearch not want to go with Yahoo because Yahoo is the competitor? Perhaps – but they may feel like Google is their competitor. Who knows which way it will go?

Q: Who do you think will come out on top?

Sullivan: I think you are going to see a balance between the three – AOL, Microsoft and Google. I don’t think there will be one big giant winner. I think one will be the more dominant one, still pull the most searches. I would probably lean toward that one being Google in the next two years just because of the lead and reputation they have.

For more information about Danny Sullivan and his study of the search engine industry, visit SearchEngineWatch.com.

Dana Greenlee is co-host, producer and engineer of the WebTalkGuys Radio Show, a Tacoma-based radio and Webcast show featuring technology news and interviews.