Now that Steve Ballmer has taken his ball and gone home, three things have become clear about the failed Microsoft bid for Yahoo: 1) This deal is not dead yet; 2) Yahoo's future as an independent company is at any rate limited; and 3) Microsoft is playing in the wrong arena.Taking those in order: the blogosphere's minute examination of the collapsed $40 billion-plus offer has reached the level of close Shakespearean analysis, as in Henry Blodgett's Silicon Alley Insider column sifting through the dueling weekend announcements and blog postings from either side. The cries of wounded innocence from CEO Jerry Yang - "Gee, we had no idea they really meant 33 bucks a share!" -- Blodgett notes, "might lend credence to the theory that this is just another negotiating tactic by Microsoft -- a card played in the hopes that Yahoo's enraged shareholders will force the company into a deal."

Blodgett actually doubts that theory, but multiple Wall Street analysts are banking on it, noting that even after today's bloodletting, Yahoo's share price still has an "acquisition premium" built into it compared with its levels before Microsoft announced its bid.

Statement No. 2 -- that Yahoo as a standalone company is doomed -- is based on the simple fact that Yahoo has had a couple of years now to "execute on its strategic mission," including almost a year under returned chief executive Yang. So far there is no evidence that it can. Now, having pulled off what analyst Bill Morrison of Think Equity called "one of the more destructive decisions for shareholder value in the history of Internet stocks," Yahoo has no more credibility left with shareholders or, for that matter, with its own executives beyond Yang and the board.

When a revenue share with your chief rival, i.e., Google, is seen as your best lifeline, you know things are dire. Interestingly, several outlets are treating the long-rumored Google-Yahoo partnership -- in which Yahoo would essentially outsource a portion of its search ads to Google, in return for a big chunk of revenue therefrom -- as a done deal, while no official announcement has appeared.

Then there's No. 3. It's easy to see the collapse of this deal as not only a major hubris moment for Yahoo, but the poisoned fruit of years of hostile wrestling-ring behavior from Microsoft. The best comment I've seen today on this is by Saul Hansell, of The New York Times, who noted that while Ballmer was alienating the Yahoo board and essentially sneering at the company he was about to spend dozens of billions on, Google was moving forward with handshakes and fistfuls of cash, as is its way.

As opposed to "the bravado and coercion that has often characterized Microsoft," Hansell remarks, Google is choosing to compete "by smiling and passing out money." Whether that's the winning strategy in a Web 2.0 world remains to be seen; what's clear is that Ballmer, who is still blustering that "Ultimately, our goal is to build the industry-leading business in search, online advertising, media, and social networking," already has lost in search and online ads. That ship has sailed: "Microsoft has put significant effort in the last 18 months into re-vamping its search engine to increase the relevance of its results and the site's ease of use while also accelerating development of new search technologies," reports my colleague J. Nicholas Hoover, with little to show for it.

Where a more focused (and less hubristic) Microsoft can still compete and win against Google is in the mobile world, which is swiftly becoming the arena for the most innovative consumer applications and the most lucrative business models on the Web.

Advertising research firm The Kelsey Group predicts that "interactive" (i.e., Web-based) ads will grow to 21% of the global $707 billion advertising market by 2012, with mobile ads taking up a growing share of that.

Google's Android mobile platform is now several years behind Windows Mobile, which began life as Windows CE 13 years ago and is now the world's fastest-growing mobile operating system. Windows Mobile represents the beneficial side of the Windows monopoly: it operates across many devices from many handset-makers, it runs the standard Office applications that users are accustomed to in their deskbound life, it has a thriving independent developer community, and it can provide the full and rich Internet experience on powerful devices running over broadband networks.

It also allows a degree of security and manageability for mobile devices that Google cannot hope to match, making it a sure favorite of IT directors worldwide. "The real value add" in the new mobile-Web era, writes Mark Anderson, the publisher of Strategic News Service, "will be in software/services, ... as it's been for the last decade in computing."

The MS-Yahoo hook-up was never a sure bet to overtake Google online. Now, Ballmer should scale back his ambition to dominate in every category and choose instead to focus where Microsoft already has forged ahead: on the mobile Web.