SEATTLE, (Reuters) – Microsoft Corp’s assault on  search engine leader Google Inc took a major step forward yesterday as U.S. and European regulators cleared the software  company’s search partnership with Yahoo Inc.

The 10-year deal, struck last July, is the biggest effort  yet by Microsoft to establish an online business to rival  Google, an area where Microsoft has lost $5 billion over the  last four years.

“Microsoft really has room to throw money at this,” said  Kim Caughey, senior analyst at Fort Pitt Capital Group. “I  think it can work. If they can make inroads in specific target  areas, they could have something positive to report.”

Microsoft has already made some progress with its search  engine, Bing, picking up 3.3 points of market share since its  launch last June.

But Bing is not likely to “push Google off a  very big pedestal any time soon,” said Caughey.

The battle for online search ads is only one front on a  sprawling war for revenue between Microsoft and Google, which  also encompasses operating systems and mobile phones. But  neither has yet managed to compete on equal terms in each  other’s core market.

“In terms of our modeling, we really don’t see any impact  from Microsoft-Yahoo on our Google numbers,” said Clayton  Moran, an analyst at The Benchmark Co.

“It doesn’t change much in terms of the competitive  dynamics of the industry right away,” he warned. “From a Google  perspective, looking out over the next couple of years, it’s a  non-event.”

The deal, cleared unconditionally by the U.S. Department of  Justice and the European Commission on Thursday, is not  expected to impact Microsoft’s bottom line, but could lay the  foundation of a profitable online business.

“Really now, the goal is about share gain. If we grow  share, we will grow our way into profitability, and we have  confidence we can do that,” said Microsoft’s Yusuf Mehdi, who  is charged with making Bing and the MSN portal a financial  success, in an interview with Reuters earlier this month.