• The Wall Street Journal (subscription required), Friday, May 4, 2007 11:15 AM

Microsoft and Yahoo are once again exploring the idea of a merger in the hope that a combined company could stave off the mounting threat posed by Google. Last year, the two tech giants discussed a merger, but the talks went nowhere. What's different this time?

For one thing, Google is becoming ever more powerful. For another, the in-house efforts of both Yahoo and Microsoft's MSN have fallen flat, in comparison to the strides made by the search giant. A management reshuffling at the top of both companies could pave the way for a new merger.

Microsoft's problem has been attracting advertisers to its MSN network. Yahoo has suffered from delays in implementing its Panama search advertising system, which hasn't sufficiently closed the giant revenue gap between it and Google. The Web giant is also suffering from competition for display ad dollars, which account for about half of the company's revenue. News of the possible merger sent Yahoo shares up 16.5 percent in early trading.

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