I don't believe that at all. You can never be all things to all people. Let's break down a couple of things the SE's offer:
Their search is their main product if you want to call it that. Besides their search and the revenue from AdWords what do they really have that hasn't been done before more successfully?
Google Earth - Google is just a knock-off of other products that are available for free.
Froogle shopping engine which has been done to death and hasn't done well with any accuracy at all. I don't believe they get much use of that.
Google Directory clone
Blogger bought and paid for
Google Talk just what we need, another IM client. Others products already provide voice, video, and IM among other things.
Desktop Search this has been done better by others
Groups bought and paid for. Yahoo gets much more traffic to their groups in my opinion although I didn't try to find stats.
Google News nothing new here. All major SE's have the feature.
Gmail MSN and Yahoo both are miles ahead in user base. What does Gmail offer the average person that the others don't?
AdSense This is where they have actually developed something that is head and shoulders above anything else available. It will be tough for others to compete with in the near future.
Of course they offer a lot of other products/services, but what product/service has been really innovative that appeals to the average user of the internet? Google has not been innovative at all. Their most used products besides search/AdSense have been bought and paid for or had already been done by others. They want to become a portal, but they seem confused on what direction to take or what the average user really wants.
What is Google really good at? PR spin. Microsoft has always been the giant that stepped on the little guy buying up innovative products and technology and trying to squash the competition. I think in the very near future you will see the attitude change with Google being the target of this type of talk. They want to control all advertising dollars on the net period.
MSN is a portal. They offer many things that are of interest to the average user. They offer areas covering all the main categories and items of everyday life including entertainment, news, finance, cars, real estate, travel, and much more. Their mail and IM along with other offerings have a user base. Do they offer anything "earth shattering"? No, but they have mass appeal as a portal for the average user. For a portal I believe their user interface at msn.com is much cleaner and easier to navigate over any other portal including Yahoo.
When was the last time anyone here really looked at MSN? They actually do a good job as a portal. They have by far the easiest to navigate site for their size and offerings. They have a problem with search, but regardless of what people state, it is new. Give them a couple years. The average user isn't going to notice any more spam in MSN search then they do at Google or Yahoo.
Also a true portal. Yahoo has a deep rooted following that use their portal for other things besides the SE. Look at their Financial forums etc. Again, they offer many things that are of interest to the average user. They also have a deep-rooted following for their IM and email offerings. They have come a long way in cleaning up their user interface and it makes it much easier to navigate the areas of the site.
Let's face it for how long Yahoo has been involved with Search it should be miles ahead of the competition. They are not. Their serps are riddled with duplicate content and mirror sites more than any other major SE. So, why does no-one complain about their serps? They do more manual bans then any SE, so how come people only complain when their sites get hit in Google? I think it's much easier to get a site back into Google then it is Yahoo
Let's face it, we want the SE's to rank authorative sites on the subject or term (well, most of us). That's a tough thing to do judge authorative value of a site. As it stands with all the major SE I can create a 5000 page site on a topic, quote people that don't exist, quote facts that are untrue, fill it up with machine generated content, and get a few thousand links to the site and it should do pretty well. The problem is that the site is full of deception, but the perception is that it's authorative. This will always be a problem. It's easy to see how you can deceive a SE and you could probably even deceive a hand edit if done properly. That's why I cut all SE a little slack when they can't see the forest through the trees.