• CNNMoney, Monday, May 7, 2007 12 PM

The Wall Street Journal went back on its own report late Friday, saying that merger talks between Microsoft and Yahoo stalled after engaging the industry with such news earlier in the day. CNNMoney reports that any kind of Microsoft-Yahoo advertising deal would be enough to make industry leader Google sit up and take notice.

However, three days after the announcement, various reports said Yahoo decided to pull out of the talks, and rightly so, according to some analysts. Despite a poor first quarter, some say Yahoo's Project Panama is still finding its legs, and a series of savvy moves, including an ad management partnership with several newspaper publishers and the $680 million acquisition of the ad exchange Right Media, should boost Yahoo's display sales, for which it projected weak sales for the second quarter. That's why Forrester's Charlene Li doesn't believe a deal will happen.

Ryan Jacobs, who owns an Internet fund, takes the view that Microsoft and Yahoo need each other. And despite strong moves by Yahoo, Google is still humming along, and at a faster pace than both its rivals. The search giant's $3.1 billion DoubleClick acquisition is widely viewed as the most significant deal in Web advertising so far this year--one that may only be trumped by a Microsoft-Yahoo acquisition.

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