Microsoft, Yahoo, BFFs Again?

We knew earlier that Microsoft and Yahoo! were talking again, and now reports indicate that a deal is all but done. On the other hand, the companies have been oh-so-close to a deal before, and until the pen is placed to the paper, the deal can still fall apart.

The deal would be what has been hinted at for months: a search advertising deal, and not the full-blown acquisition of Yahoo! that was proposed by Microsoft in early 2008, and quickly rejected by Yahoo!

Both Bloomberg and Boomtown cite unnamed sources familiar with the negotiations that state pretty much what has been tossed around since the initial deal was rejected: Microsoft buys out Yahoo!'s search advertising business and guarantees certain revenue back to Yahoo.

Both Microsoft and Yahoo! need a way to combat Google's dominance. According to market research firm comScore Google controlled about 65% the U.S. search market in June, while Yahoo ranked second with 19.6% and Microsoft was third with 8.4%.

Microsoft recently released its Bing search engine, which has grown its search market share ever so slightly. Most still believe that only a partnership between Yahoo! and Microsoft can seriously threaten Google, however.

Jack Neele, of investment bank Robeco NV in Rotterdam, told Bloomberg:

“This is the only thing they can do to address Google’s dominance. Together they can offer big advertisers a viable alternative to Google.”

Both Bloomberg and Boomtown believe a deal between the two companies could be done as early as this week, but Bloomberg believes it is more likely to close next week.

Or based on past history between these two, it could just as easily fall apart by then. We shall see what we shall see.