Software giant Microsoft's $31 per share takeover bid in January for lowly Yahoo came when the once-powerful Web portal was trading at $19.18 a share. Many assumed then that the big upside to a Yahoo takeover was that it gave Steve Ballmer and Microsoft a way to compete with Google for the U.S. search engine market.

Guess again.

Yahoo has something in its pocket that not many people recognize outside Silicon Valley circles: the China market.

While the dot-com days here in the U.S. have come and gone, they are only beginning in China. That's because China’s technology infrastructure has been relatively undeveloped when it comes to Internet access for its more than 1.2 billion citizens.

At the end of last year, according to the China Internet Network Information Centre, there were 210 million Internet users, up from the previous year’s 137 million.

When the newest report is released, it is expected that China will have the largest Internet population in the world. What is more surprising just 16 percent of Chinese are online.

Investment in fiber and advanced cable networks has increased household broadband penetration — the kind of high-speed Web access that will really goose up participation — to 16 percent in 2007, with estimates of 26 percent by 2012 and 31 percent by 2017, according to Media Partners Asia.

As this market continues to grow, there is a huge opportunity to capture the search engine and Web portal markets in the world’s most populous nation.

That type of thinking allowed Yahoo, back in 2005, to purchase a 40 percent stake in Chinese Internet company Alibaba.com. Since that purchase, Yahoo China has merged all of their Chinese operations with Alibaba to create one the largest internet companies in all of China.

Chinese web portals such as Baidu.com, Sina.com, and Sohu.com have seen unparalleled growth over the last several months and breakout performances in the U.S. stock markets.

Since April 2008, the equities of industry leaders Sina Corporation have risen as much as 48 percent, Sohu.com 65 percent, and Baidu.com 30 percent.

The power of Chinese Web portal companies reveals a fatal flaw in the Google armor. Google has failed to dominate the global search engine markets the way that it now dominates the U.S. search engine market.

Search engine insiders have always known this. Google knows this and their competitors at Microsoft and Yahoo know it.

So the play for Yahoo is more than bailing out a struggling search engine or a battle of egos to compete with industry juggernaut Google. This is about Microsoft dominating the global search engine market by being first to dominate the Chinese search engine market.

According to UBS analyst Ben Schachter, 33 percent of Yahoo’s market value is contained within Alibaba.com in China and Yahoo Japan.

That is why Yahoo founder and current CEO Jerry Yang and Yahoo's board members are now calling for any Microsoft bid to exclude Yahoo’s Asian assets, because that is where the real growth and value of Yahoo will come from.

So, despite calls from pundits and from billionaire investor Carl Icahn to sell, Yahoo investors must take time to realize what they are selling — the future of the Internet itself.