GooHoo? Google in talks about buying Yahoo!

Reports this weekend suggest Google could be lining up to buy its one time rival Yahoo!. Google is said to have spoken to at least two private equity firms about a deal to buy Yahoo!, which has been in a state of turmoil since chief executive Carol Bartz was sacked in early September.

The Wall Street Journal reported that Google and its partners have held initial discussions, but have yet to come up with a concrete proposal to buy the firm.

The paper does not say which private equity firms Google has spoken to. However, any deal could run into anti-trust issues. The WSJ said that Google is interested in selling some advertising across Yahoo’s websites, according to people familiar with the matter.

Yahoo has increasingly struggled to get decent prices for its display advertising as it faces a growing challenge from Facebook as online ad budgets shift into social networks. With Twitter also now pushing hard in this area Yahoo’s problems are only likely to increase.

“Any deal involving Google could also bring other opportunities, such as bring Google’s social networking service Google+ to Yahoo’s audience of nearly 700 million unique visitors a month, these people said.

“Yahoo also has relationships with many “premium” content publishers such as ABC News, which provides video and other content for Yahoo sites and for which Yahoo currently sells ads. Google is interested in having deeper business relationships with such publishers, one of these people said. The Wall Street Journal reported.

If Google joins the fray it is likely to face a rival bid from Microsoft, which after its failed move in 2008 is again interested in snapping up Yahoo in partnership with private equity firms. It is also being speculated that Google’s entry into the competition for Yahoo could be a tactic to drive up the price that Microsoft eventually pays.

A number of private equity firms, including Silver Lake Partners, Providence Equity Partners, Bain Capital, Hellman & Friedman, Blackstone Group, and KKR, are also said to be interested.

Another possible bidder could be AOL. Tim Armstrong has long held an interesting in mergers the two businesses.

At the same time as talks about Yahoo’s sale circulate Microsoft, Yahoo and AOL are also taking to each other about an ad deal.

Last month the three were said to be talking about selling ad inventory on each other’s sites, which will make them more competitive to both Google and the ad networks.

They were working towards a deal to sell each others’ unsold “class 2 display” graphic ads, which would normally be handed over to ad networks. The revenue on the ads will be shared three ways.