A few moments ago (12:30 PM PST) the Wall Street Journal reported that Google and Yahoo are going to announce very shortly that they will be entering a cooperative agreement: Yahoo Inc. may be carrying a limited amount of Google advertising. It is conceivable that this first step could lead into a stronger association of the two massive Internet entities.

This development comes on the heels of Microsoft's February offers to buy Yahoo out for about $45 billion. This offer was turned down by the Yahoo brass, because they thought it was a too low. While Yahoo is still a Internet force to be reckowned with, it has been slowly losing its potential to expand in the future, making it vulnerable to take-over, and open to amalgamation with either giant (Microsoft or Google). Google, with an massive abundance of capital at its command, would be able to absorb Yahoo into its existing corporate infrastructure probably without much of a problem. Yahoo's web assets including their search engine, web directory, and extremely popular portal would complement Microsoft's existing web services well -- perhaps so well that Google would want to purchase them just to prevent them from helping Microsoft's portfolio.

An official announcement is expected to be coming soon. If it is announced that Yahoo will carry Google ads, you can expect things to be heating up at Microsoft Global Command -- but perhaps this is just a move to drive Yahoo stock up, and the company hopes to remain independent of either behemoth.    

6:30 PM Update: The Wall Street Journal is now reporting that Yahoo and AOL are have serious talks about merging. This merger would make sense -- if they combined forces and increased ad revenue through Google, it would make them large enough to counter influence from Microsoft. Link.