goohoo.jpgBy Michael Santo
Editor-in-Chief, RealTechNews

It hardly seems like enough time has passed, but the test of Google search ads with Yahoo! search has apparently been so successful that things are already progressing. The Wall Street Journal’s “people familiar with the situation”, who seem all over the MicroHoo deal, have spoken thusly.

As you may recall, Global Markets analyst Mark Mahaney has said that such a deal could increase Yahoo!’s cash flow by more than $1 billion a year, because Google generates much more revenue for each query than Yahoo!’s does.

Such an infusion of additional revenue would obviously complicate matters for Microsoft, raising the value of Yahoo! and potentially blocking any hostile takeover by Microsoft. At the very least, it would make things more difficult for Ballmer and group, as well as increasing the odds that Microsoft will have to raise its bid.

It also gives Yahoo! time to continue its discussions with AOL. Of course, would anything like this even be under consideration without the pressure from Microsoft. Naturally not. Is this just gamesmanship? Hard to say, but the clock is ticking on Microsoft’s ultimatum to Yahoo! and something has got to give soon.