Yahoo in Talks With Google Over Search Ads

Yahoo (NASDAQ: YHOO) is in advanced talks to carry Web search advertising from Google (NASDAQ: GOOG) as part of a test to evaluate the revenue potential of a broader outsourcing arrangement, The Wall Street Journal reported on its Web site on Wednesday.

Citing people familiar with the matter, the report said the discussion was part of Yahoo’s pursuit of alternatives to Microsoft’s unsolicited takeover bid.

Yahoo spokeswomen were unavailable to comment

A Google spokesman declined to comment, saying he was unaware of the story and that the Journal had called his company for comment.

Earlier, citing an interview with portfolio manager Bill Miller, Journal reported that a major Yahoo shareholder, Legg Mason might back Yahoo’s effort to stay independent if Microsoft (NASDAQ: MSFT) lowers its buyout offer.

This week Yahoo countered Microsoft’s deadline, saying the offer still undervalued it. In a letter to Microsoft CEO Steve Ballmer, Yahoo wrote that it would consider only a better deal.

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