Yahoo Tries Out Google Ads, Teams With AOL

In a move possibly designed as an end run around Microsoft's bid, Yahoo execs have decided to do a test placement of Google ads on the Yahoo family of sites, and to join forces with Time Warner / AOL. A partnership between Yahoo and AOL would give the struggling internet company enough clout to fight off a Microsoft bid, especially if the test of Google ads on its site is successful.

Microsoft isn't taking the news lying down, however. It is approaching News Corp, owned by Rupert Murdoch, with the idea of partnering to complete their hostile takeover of Yahoo. News Corp has bowed out of the race for Yahoo once before, so it isn't clear how likely they would be to sign on with Microsoft in its attempt at buying the internet presence it hasn't been able to build on its own.

Lately, Microsoft products like Hotmail and Windows Live have struggled with uptime. As these internet services crash and burn repeatedly, the internet community is beginning to question whether or not Microsoft is the right company to buy Yahoo. If they can't handle their own user load, how can they take on the even larger load that comes with Yahoo? As much as I despise AOL as a company, there is little question that AOL and Google would both be better suited for Yahoo's needs.

If Time Warner / AOL and Yahoo strike a deal, source close to the negotiation say that Time Warner would split the AOL dial up service off from the online AOL services brand, make a cash investment that is greater per share than Microsoft's, merge AOL's online services into Yahoo's existing service, and control about 20% of the company altogether, with Yahoo utilizing a portion of the cash influx to repurchase its own stock. That sounds like a solid plan, though Time Warner and Yahoo have so far not verified its validity.

The Microsoft - News Corp - Yahoo option, should that be proven as more than just speculation, would possibly be more complicated than helpful. Because each entity is a heavy hitter in its own right, the direction of the company and the future of aspects like an ad revenue split are not as clear cut as the Time Warner / AOL possibility. News Corp would bring a level of online experience that Microsoft lacks, helping to even out any bumps in the road in running Yahoo's much loved services like Flickr and Yahoo Groups. Microsoft brings little to the table with a continued reluctance to conform to internet standards and a seeming inability to create a working internet service.