According to Nypost Microsoft wants to purchase Yahoo!. This is not the first time such a rumour has surfaced on the web though.

Google has been pushing Microsoft hard. Very recently it overtook Microsoft has the Most Valuable Brand. A week before that Google won a bidding battle with Microsoft and acquired DoubleClick. And of course in spite of it’s best efforts Microsoft has failed to make any headway in the Search Engine Market. Given, these circumstances buying Yahoo! seems like a smart thing to do.

The combined marketshare of Yahoo! and Microsoft’s Search Engines is 27% worldwide and 38% in the US. Microsoft also stands to gain from this deal in another important market – Online Advertising. Recently Microsoft CEO Steve Ballmer stated that his No. 1 regret is that Microsoft was late to enter the Online Advertising market. And Microsoft’s adCenter isn’t exactly setting the market on fire and would probably find it hard to even overtake YPN. On the other hand Yahoo! is expecting it’s revenue from Search Marketing to increase thanks to Panama. Yahoo! also stands to gain from this as Microsoft can deliver it’s content to a larger and wider audience. Based on numbers, this deal should be a win-win situation for both the companies.

To sum it up, Microsoft currently dominates the desktop market. However, its still struggling to make significant impact in the online world. Over the next decade internet is going to see lots of growth and has a lot of potential. And, Yahoo - being primarily web based, would considerably ease the task of getting a stronghold in this area for Microsoft.

However, there are other things to consider. Yahoo! itself is one of the largest brands on the internet with it’s own slew of products. If this deal does go through, then it it would be interesting to see how Microsoft goes about integrating Yahoo!’s products with it’s own. Integrating such a big company may well turn into a logistical nightmare. Also, there is the possibility of cultural clash as Om Malik points out. A partial solution to that could be allowing Yahoo! to exist as a separate entity. Whatever the case may be, if Nypost has got their facts right then this could well be a defining moment for Microsoft, Yahoo!, Google and the Web in general.

Update : Wallstreet Journal is reporting that the takeover is not happening. (via TechCrunch)

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