why is everyone so quick to roll over the second one of the big boys enter your area? Did you really expect your site to stay unique?
Its not like those big companies had vast amounts of success outside their core ventures. Even Google the internet behemoth, has had very few #1-#2 products, most of their products are pretty average. And lets not even talk about Yahoo.
You want to know how the Google version of your product will look like? They'll probably just add a "Flash" link under "more v", and that's it, you'll be able to search flash but it'll be hidden a few clicks away, where 99.9999% of users will never see it. So it'll have its 15 seconds of fame on Techcrunch and the blogosphere and then it'll go away.
So you can compete just fine. I would change the site around so it looks a little bit more like a content site. i.e. try something along the lines of youtube, where you show some featured search results for video/games. And I'd come up with some tag line that basically tells any person that comes to your site right away, that THIS is the place where they can find any flash game/video on the net.
You need to look at flash search as a niche. And niches is the place where big boys have constantly gotten their asses kicked by the 1-2 man start-ups. Plenty of people competed with Google, survived, and were bought out by them. So why not you?
So instead of moping that you finally have competition, look at Google's attempt at your technology, figure out how you can differentiate, and then add the few features that they missed.