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Not long after Carol Bartz took over at Yahoo in January she dropped the “F Bomb”. Explaining what was wrong at Yahoo, the tough-talking executive said there were “a lot of people running around telling engineers what to do but nobody is f*****g doing anything”.

If anything, that endeared Bartz to potential critics. After years of bloodless management, here was a woman fired up to get Yahoo moving again.

She arrived as the floundering internet giant was showing co-founder Jerry Yang the door. Shareholders were furious that Yahoo had rebuffed a $33-a-share offer from Microsoft and today the shares are worth less than half that.

It had lost its way defending against the software giant and was falling ever further behind Google. Bartz was going to give Yahoo “some friggin’ breathing room” so it could “kick some butt”. Seven months later it’s Bartz’s butt that is getting the kicking. She is accused of selling off Yahoo’s crown jewel for a song.

Microsoft finally reached a deal with Yahoo last week to, in effect, take over its search business. It will make Microsoft’s Bing search service Yahoo’s search engine, handing the Windows software giant almost 30% of the search market and is the end of an era in internet search, reducing the field to two key players: Microsoft and arch enemy Google.

Microsoft will pay Yahoo 88% of the search revenue generated from its sites in the first five years of the agreement, the companies said. But for Yahoo, once the leader in online search, it is the end of the road.

Instead, it will concentrate on its other strengths in mail, news and online content. Some observers are already worrying that this strategy could be the beginning of the end for one of the biggest names on the net.

The opinion of analysts so far is that last week’s search sale was a great deal for Microsoft. Jeffrey Lindsay, analyst at Sanford Bernstein, said Microsoft’s old offer would have valued Yahoo at about $46 billion (£27.8 billion). He reckons the new deal will cost Microsoft between $4 billion and $5 billion. “Buying yourself 20% of the US search advertising market for, say, $4.5 billion is a hell of a day’s work,” he said.

Bartz once talked of the “boatloads of cash” she would need before parting with Yahoo’s search engine. Analysts had speculated that Yahoo could get an upfront payment of up to $1 billion for doing the deal.

“As far as we’re concerned, the boatload of cash is preserving our revenue line,” Bartz said last week. “Having an upfront payment didn’t really help us from an operating standpoint.”

Shareholders baled out of Yahoo’s stock as if the company was going down. So negative was the reaction that Microsoft’s boss, Steve Ballmer, felt the need to come out and say what a good deal it was for Yahoo. It would now get 88% of the revenue but 0% of the costs of running and developing search, he said.

As he had just saved Microsoft about $40 billion, Ballmer may not have been the right man to sell the other side of the deal. Yahoo’s shareholders remained unconvinced. Search has been the biggest and most lucrative business on the web. Without it, what is Yahoo?

Bartz is undoubtedly a tough operator. She worked her way through college as a part-time cocktail waitress in red mini-skirt and fishnet stockings.

She is a cancer survivor and workaholic who used to read so much on her long commutes to the office that her driver had to regularly pull over for her to be sick. But work ethic is no substitute for strategy and her critics say that is what is missing at Yahoo.

Lindsay compared Yahoo with eBay, another company that had attracted critics in recent years. “I understand eBay’s strategy,” he said. “They want to get into fixed-price goods. That’s where the growth is. There might be some bumps along the way but it’s clearly their strategy. I follow Yahoo very closely and I have no clear idea where they are heading.”

Larry Haverty, the portfolio manager with Gamco Investors in Rye, New York, said the negative reaction was understandable but this was only “act one”.

“I’ve always thought that they [Yahoo] had to do this. There was no chance of them competing against Google,” said Haverty.

Advertisers have reacted favourably to the deal, which creates a strong No 2 to Google. Haverty said the situation was now similar to that of Coke versus Pepsi and that, between the two of them, Microsoft and Google could end up expanding the search-advertising market at an even faster rate than before — which will benefit Yahoo’s bottom line.

For others, however, Yahoo’s capitulation is attracting comparisons drawn with two other fallen internet idols: AOL and Lycos. Like Yahoo, both were once big players in search. But after selling out of search, they have each fallen hard.

AOL once had more than 30m members worldwide. It handed over the running of its search engine to Google in 2002 to concentrate on producing online content and other web services and has been sinking ever since. AOL didn’t make the top 10 list of websites in America last week, ranking 14th, according to Hitwise, the internet research group.

In 1999 Lycos, which began life as a search engine, was the most visited online destination in the world. It now describes itself as “a comprehensive network of social media websites that foster online communities”. Its search engine is run by Ask.com, an also-ran in search. Lycos had 0.02% of the internet search market in America last week, compared with Google’s 70% and Yahoo plus Bing’s 26%.

Colin Gillis, an analyst at Brigantine Advisors in New York, said: “This is the end of an era in search — the rise of Google and the death of Yahoo.” He said that search was now a “two-horse race” with some interesting smaller players emerging on the sidelines, such as Wolfram Alpha and Twitter Search.

The likelihood of a new giant player appearing is small. Even if a start-up can develop a technology sufficiently innovative to make a difference, the cost of indexing the web is now enormous. But so is the prize for the winners. Search, said Gillis, has been the “best business on the internet. It’s the one area where users are actually telling advertisers what they want.”

Yahoo, already distracted by its on-off talks with Microsoft, had not looked like a serious competitor to Google for years, Gillis said.

However, as Hitwise’s Matt Tatham pointed out, Yahoo still has big leads in areas other than search. Yahoo Mail is the No 3 website in America. Yahoo.com is No 4. Yahoo News is more popular than Google News and it leads in sports and business news.

Of the top 10 American websites, Yahoo owns three. Yahoo Mail, Yahoo.com and Yahoo search. Google owns two, Google.com and YouTube. “Yahoo still has plenty underneath the hood,” said Tatham. “Only time will tell what they can do with that.”

For others the signs are not good. Gillis said the deal between Microsoft and Yahoo will lead to complications as the two sides integrate and there could be regulatory hurdles that will further distract Yahoo’s management.

And when, and if, it does go through, Lindsay said there was as yet no clear picture of what Yahoo will really be on the other side. “Their strategy seems to be that Yahoo is a little bit of everything. And that means nothing,” he said.