In fact this is a second time that Yahoo! appears to be negotiating with AOL merger, the earlier talks failed owing to differences on prices. With Microsoft's "hostile" bid in its face and an impending economic downturn, Yahoo!'s is left to consider all the options it has. Tie-ups with Google and Disney are also possibilities being explored.

A merger between AOL and Yahoo! is quite plausible as it would enable Yahoo! To get a stronghold the mainstream advertising. Moreover, with AOL's clients becoming Yahoo!'s client as well, sounds positive for Yahoo!'s future. A possible outcome could be that AOL and Yahoo merge their media businesses and services with Google as the search/ad engine.

All said and done, the other angle to the story is that Google also has a 5 per cent stake in AOL, would this fact be an obstacle to such a merger to materialize remains to be seen?

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