Yahoo, Google near ad deal

Funny what happens when Microsoft Corp. (NASDAQ: MSFT) is breathing down your neck.

Yahoo Inc. (NASDAQ: YHOO) may be close to throwing in the towel on search. According to The Wall Street Journal, the Internet portal is in talks with Google Inc (NASDAQ: GOOG) about an advertising partnership.

The short-term test, involving a very limited percentage of Yahoo's Web search queries, "is designed for the two sides to evaluate the revenue potential of a broader search ad outsourcing arrangement," the paper said. "They have been discussing such an arrangement as part of Yahoo's pursuit of alternatives to Microsoft Corp.'s unsolicited acquisition offer."

This is long overdue.

Yahoo has wasted billions of dollars of shareholders' money chasing Google's tail in the search market. Its lack of progress in that area is the main reason why its shares have been beaten down by Wall Street and has attracted Microsoft's interest.

In other news, top Yahoo shareholder Bill Miller of Legg Mason Inc. (NYSE: LM) has criticized Microsoft for blundering with its ultimatum to the Internet portal instead of just raising the offer.

The ball now is in Redmond's court.