Okay, we all know the big news: Microsoft wants Yahoo.

In fact, it has been the only topic visible ‘above the fold’ of The New York Times’ tech page for the past few days. Michael Krasny whipped out a KQED Forum about it first thing this morning. It’s the talk of the town.

But, two things seem to get lost in the jumble. I want to make sure they’re clear.

First, this deal is about display advertising just as much OR MORE than it is about search ads.

Yahoo! and MSFT are beat in the search department. They want to make inroads against Google. They’ll make some with this acquisition. But, it’s frankly too late to kick Google’s ass in search. It’s just not going to happen anytime soon.

But, there’s an egg that’s just as fat on the horizon. It’s what the ad industry calls display advertising. You know ‘display ads’ as annoying banner ads.

Big companies that spend big money on big numbers of ads, like beer, auto and CPG companies, have up to now spent their big wads of dough on TV. They’ve also spent a tad here and there on radio print and outdoor, and a bit on an experiment known as the Internets. The thing is, these here Internets are here to stay and these big companies with big money are finally getting around to realizing this.

Display advertising is going to grow big. Real big. As stupid as you may think Microsoft is, they realize their main revenue stream is in danger. Their stranglehold on a proprietary local fat client operating system and productivity tools will only last so long. They need to diversify.

Microsoft knows Yahoo gets eyeballs. Together, Microsoft and Yahoo together would form a ‘must buy’ company for display ads, just like Google is a ‘must buy’ company for search ads. Just as an ad agency feels it has no choice but to use Google for search advertising, so will they feel that a combined Microhoo will offer such a large number of eyeballs at an attractive price that they will be compelled to purchase display ads from Microhoo for any large scale campaign.

MSFT doesn’t want to break the Internets. It doesn’t want to make another proprietary operating system. It just wants your eyeballs.

Second, it is inappropriate for the government of the United States to prevent this transaction from taking place. Google’s whining is appropriate, as Google’s stockholders absolutely demand lobbying as lobbying is an accepted and expected form of modern business tactics. My thoughts about antitrust regulation are here, so I won’t repeat them.

So, MSFT wants your eyeballs and the government shouldn’t get in the way. That’s my take.