Seeing Microsoft's latest attempt to take a chunk out of Yahoo - this time, to in effect take over its search advertising business - I'm reminded of one of Bob Monkhouse's lines: "Everyone laughed when I said I wanted to be a comedian. Well, they're not laughing now."

Everyone did indeed laugh when Microsoft made its $44.6bn bid for Yahoo in February 2008; principally inside Yahoo, where they had financial projections which suggested that the company would be worth far more within a short period of time.

Unfortunately, as anyone outside Yahoo could have told them, the projections were nonsense - made when the credit crunch had barely begun to bite, and when people assumed that online advertising would continue to grow without end, swallowing up all the money being spent on TV, radio, print and other outlets until it was the only form. Jerry Yang, then head of Yahoo, turned the deal down, and despite Microsoft's chief executive Steve Ballmer repeatedly trying to talk some financial sense into him (although whether the deal would have made corporate sense is a different question entirely), it didn't happen.

Well, reality intruded. Yang was unceremoniously dumped, ousted by carpetbagging shareholders who'd hoped to make a pile from Microsoft's money. Carol Bartz is now in, and she's a pragmatist - allied to the fact that Yahoo's profits have slumped seriously.

Nobody's laughing, especially at Yahoo, and although Yahoo is still a bigger referrer than Microsoft's newly-rebranded search engine Bing - for the Guardian Technology site, for example, Yahoo generates about 30% more referrers than Bing, though both are almost one-tenth the size of Google as a referrer - the momentum is with Microsoft.

The deal being considered would mean Microsoft takes over the search advertising for Yahoo, and pays back a guaranteed amount each year. This is a bit like sale-and-lease-back on a commercial building: Yahoo gives up one of its most valuable properties, but hopes to get a guaranteed amount from it.

For Yahoo, that's an admission of defeat in the search market: one of the most-visited properties online deciding that it can't cut it, and that search and search advertising are something that others do better.

In the physical world, sale-and-lease-back always makes accountancy sense (it reduces your static assets and increases your flexibility) but it cuts you off from what you used to be tied to: the organisation becomes rootless.

Taking control of Yahoo's search business would give Microsoft 30% of the US search business. But the effects will be less on Microsoft, and more on Yahoo.

Bartz and Ballmer discussed the failed deal at the AllthingsD conference in May, and all the signs are that that is where they began to get the discussion back on track. Microsoft's track, that is.

Yahoo is due to announce its past quarter's results next week, and Bartz will be keen to have something to offer to Wall Street analysts, who will be seeking evidence that her hard-as-nails approach is bearing fruit.

The problem for Yahoo is that after all these years it's still trying to decide what it's for. Is it a search engine? Is it where you get your email? Your news? Your TV? Bartz hasn't, as far as we can tell, given any indication to the troops of what the company's real mission is. Google's is "to organise the world's information and make it accessible". (And sell adverts against it.) Microsoft's is to "get a computer on every desk, running Windows." (And run Windows on anything that can run an operating system.) What's Yahoo's?

If the deal is inked - and Kara Swisher of AllthingsD, who has followed its ups and downs perhaps the closest of all the reporters out there says it's "down to the short strokes" - then Microsoft will begin to look like a worthy adversary for Google.

But Yahoo, despite its size, will start looking like a rump. Analysts expect it to earn about $104m profit on revenues of $1.14bn, compared to $131m on revenues of $1.8bn a year ago. That's not good either.

In short, this deal with Microsoft - should it come off - will be good for Microsoft. But it still leaves Yahoo searching for an identity it lost some time in 2000. What nobody has yet answered, but Bartz needs to, is: what is Yahoo for?