Only a few days after Microsoft (NASDAQ: MSFT) was reportedly raising its bid for Yahoo (NASDAQ: YHOO) to $33 per share the company now decided to withdraw the offer, according to news by Reuters. The reason being that Yahoo was looking for $37 per share.

“Despite our best efforts, including raising our bid by roughly $5 billion, Yahoo has not moved toward accepting our offer,” Ballmer said in a statement.

“After careful consideration, we believe the economics demanded by Yahoo do not make sense for us, and it is in the best interests of Microsoft stockholders, employees and other stakeholders to withdraw our proposal,” said Ballmer.

To me Yahoo’s decision looks like yet another bad move in the company’s history. Despite the fact that the search engine company has some innovative ideas and features in development, it’s unrealistic to believe they would make it back to the top alone. I had hoped for a Microsoft/Yahoo deal, because this would finally have caused more competition for Google, hence giving an incentive for more innovation and maybe a shift in how things work on the Internet. As it is now, Google has too much power on the web, but I don’t see who could challenge them in the near future.

Yahoo could do well if its possible partnerships with Time Warner’s AOL and Google will work out as planned, but it would also outsource its important search advertising unit to Google and therefore hand over even more power to GOOG. This would also hurt domain owners, by the way, as they then had even less choices when it comes to the decision of which pay-per-click provider to use for the monetization of their traffic.

Microsoft, on the other hand, really needed to acquire Yahoo not only because of Google’s unmatched predominance on the Internet but also because Google is steadily moving forward into Microsoft’s traditional terrain by offering web-based software applications directly competing with Microsoft’s products.