"Yahoo has some very ambitious plans they have announced these past three months, and now they have to deliver and start fulfilling the promise some of these projects represent," Sterling said.

"The onus is on Yahoo to explain why it's worth $37 per share and in particular to articulate very quickly what its strategy is, now that it's been given this reprieve," Li said.

It's also unclear how wise it will be of Yahoo to outsource a significant portion of its search advertising business to Google, a deal that, if completed, may be announced as early as next week, according to a source close to Yahoo.

"While Yahoo may pursue a Google search partnership as a way to appease shareholders through enhanced cash flow, we believe such a deal would face intense anti-trust scrutiny. In addition, it would cede control of search to Google," Moran said.

Li isn't convinced that the deal's short-term financial boost will justify passing up the long-term advantage of being able to integrate search into its overall ad strategy. "That's going to be interesting to watch," she said.

Microsoft also has its own set of challenges created by its bid. For starters, it needs to explain how it plans to boost its Internet unit now that the bid collapsed, after outlining many reasons why it needed Yahoo to do it, she said.

This would be a good time for Microsoft to change course and stop vowing to catch Google in search advertising. "That game is over and Google won," Li said.

However, by focusing on unifying display advertising, such as banner ads, with search advertising in a single platform, Microsoft, as well as Yahoo, could compete more effectively against Google, whose display advertising business is very small, she said. The synergy between search and display ads can make both formats significantly more effective and valuable to advertisers, Li said.

While Google has said that it will make significant progress in display ads now that it owns DoubleClick, Li isn't so sure. "Google doesn't have a good feel for the display ad market, which is an old network of agencies and creative types and media people who all know each other from ages ago," she said. "Yahoo and Microsoft really had to earn their way into that space over the past decade."

Since it obviously has the cash, Microsoft should go shopping for other companies that could give it some of the products, services, and innovative technology it was hoping to get from Yahoo, said Gartner analyst Allen Weiner. "I'm looking for Microsoft to get aggressive with a buying spree," he said in a phone interview.

In an April 25 report, Moran and his colleague Kevin Buttigieg listed some companies that, if the Yahoo acquisition failed, might make sense for Microsoft to consider acquiring: Time Warner's AOL, News Corp.'s Fox Interactive (which includes MySpace), ValueClick, CNet, and Facebook.

For his part, Weiner thinks we might see Microsoft pursue an acquisition of a video platform provider like Brightcove and ExtendMedia, and an online presence company to complement its strong Webmail and IM services like Twitter.

But whatever it does, Microsoft should take some concrete steps to move on in the public eye. "I think Microsoft should do something quickly to show the world that Yahoo bid wasn't a setback," Weiner said.