Yahoo is moving closer to handing off its Web search advertising to Google having just complete a successful test.
Although Google and Yahoo are keeping tight lipped on a possible partnership, one can expect Yahoo to join a three-way deal where Yahoo would merge with Time Warner AOL in return for Time Warner taking a stake in Yahoo.
Outsourcing Web search advertising to Google will allow Yahoo to focus on its online brand advertising.
Of course, any potential deal will need to fend off antitrust challenges, which may include limiting the ties to specific groups of search queries or regions.
Yahoo is considering alternatives following Microsoft’s unsolicited $US31 per share takeover offer, an offer that Yahoo felt undervalued Yahoo. However, discussions with Google will not necessarily prevent progress towards an eventual merger with Microsoft.