While in Silicon Valley recently, I had a chance to meet up with Tony Conrad, who is a venture capitalist. We talked about one of his ventures, Sphere, which got its start in 2005.

Well, now the company is a part of Time Warner Inc. (NYSE: TWX)'s AOL (the price tag of the acquisition was not disclosed).

At the core of Sphere is compelling technology -- that is, an advanced search system. However, the issue was: what to do with it?

Those of you who have been interested in blogs for several years are probably well aware of the company Technorati. This website made a splash by becoming the first market-share dominator in the entire Web 2.0 space, especially in the blog search engine space. But times have changed and Technorati is struggling to hold on.

The situation in Technorati is quickly shifting to more difficult, seemingly by the day. As TheDeal.com reported on Friday, the founding CEO of the company recently stepped down. In addition, the company has been forced to recently slash eight jobs to adjust the company's expense structure. Perhaps the most startling of it all -- Technorati is quickly losing its dominant market share position.

According to research firm Hitwise, Technorati's number one market share position is now just secured by 1%. The company currently stands at 34% of the blog search market, while Google's blog search product is a strong and growing 33%.

As you can see from the chart below (courtesy of Alexa.com), Technorati's page views figures are well off of their peak. Understandably, this traffic decline has been a huge catalyst to a weakening position in the blog search market, as well as financial difficulties, because for most internet companies, traffic is everything.

Blogger David Berlind was browsing around in Technorati and found a strange error. He checked again, just to be sure, but it appeared that his Technorati error was causing a Yahoo! 404 Not Found message. He wonders if Yahoo! has acquired the leading blog search engine.

If the buzz is true, it will prove TechCrunch's Michael Arrington (and Red Herring's Liz Gannes, who quoted him) to be one heck of a prognosticator. Back in January, he asked, "When Will Yahoo! Acquire Technorati?" and noted that Technorati CEO Dave Sifry had declined to comment on the speculation.

"No Comment" has never been proof of anything, but strange errors may be at least evidence enough to start the rumor mills churning. Interestingly, both Technorati and Yahoo! are spending a lot of time this week talking video; Technorati struck a deal with Paramount to help create buzz about new movies, and Yahoo! previewed its new home page with (of all things) video right there front and center.

Yahoo! was solidly up in trading today, 53 cents, to $29.53, and has soared in after hours -- up over 4% since yesterday's close. Everybody loves a rumor.