Microsoft Corp’s assault on search engine leader Google Inc took a major step forward on Thursday 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.

Microsoft shares rose 1.2 percent and Yahoo’s rose 0.7 percent on Nasdaq, in a broadly higher tech market.

Google, which did not oppose the partnership, did not comment specifically on the regulatory approval but said that there has always been "robust" competition in the search ad business. Its shares rose 1.1 percent.