The older and bigger, the slower (Score 1)

I agree, in terms of innovations, Google also has the advantage of being the younger and smaller of the two.

When a company becomes larger, bureaucracy tends to creep in and stifle innovation. When it becomes older, more resources are devoted to maintaining and supporting existing apps and customers. Also it's harder to break into something new when you have legacy apps (that you have to retain compatibility with) holding you back. Hence innovation by acquisition.

With that said, there are factors other than innovation that will determine who will come out ahead (I think they'll both be around). For example Yahoo has a huge installed base of _registered_ users. For a majority of users, good enough is good enough, so switching to another service is almost out of the question. It remains to be seen if Google can pry that away.