With Yahoo!'s CEO Jerry Yang moving out and moving on, Yahoo now has to pick between reviving a possible buyout with Microsoft, albeit at a price lower than the $47.5 billion offered six months ago, or to continue to pursue a much-awaited turnaround that is increasingly as elusive as a like a mirage.

Reports suggest that who steps in to Yang's office would be an indication of this choice. In case the successor is someone from within Yahoo, or someone friendly to Microsoft, it could mean that the Yahoo board is undertaking a fill-in-the-blanks exercise while a buyout takes shape. Alternatively, if Yahoo were to get a CEO with some history, or an up-and-coming technology star, it would signal an upcoming long campaign from the trenches.

Though Yang believed he could turn Yahoo's around, his proposed partnership with Google couldn't withstand the threat of an antitrust battle with the federal government. With Google's support gone, Yang and Yahoo's board couldn't figure out any better way than to part ways, even if it meant that the top slot was yet to have a successor, even as he once again puts on the hat of ''Chief Yahoo''.
 
Reports suggest that given Yahoo's leadership in email and news, with an audience of 500 million people could be a large enough motivating factor for a star player to seek Yang's former office, even if Yahoo's fortunes at the stock markets have been sagging for over three years. Speculations are rife, with suggested successors including the obvious such as Yahoo's current president and Yang confidant Susan Decker, or Yahoo's former chief operating officer Dan Rosensweig, who moved out following a management shake-up last year.

Other names are even more interesting, such as that of media mogul Rupert Murdoch's chief aide from News Corp, Peter Chernin, who is reported to be looking to negotiate another contract. Another suitor is Jonathan Miller, the former CEO of AOL, even though his severance from AOL in 2006 mandates that he can't work at a competitor or rival till March 2009.

`Microhoo' could pose the best bet against Google's dominance

Analysts have also been reported in the recent media as saying that Yahoo might just negotiate a search business deal with Microsoft Corp, even though it remains to be seen if the partnership would be able to pose a challenge to industry leader Google.

Apart from the envisioned cost savings of around $1.5 billion from combining Microsoft and Yahoo's search businesses, the proposal has the potential to give a larger slice of around $10 billion of the US Internet search market, which will definitely translate into more revenues per click.

As a ripple effect, the higher cash flow would also do good to Yahoo's financials, and give Microsoft a better Internet presence.

It may be recalled that after the collapse of the original $47.5 billion takeover bid, Microsoft had offered $1 billion in a second proposal to buy Yahoo's search business, which would have also made it a 16 per cent stake holder in Yahoo's equity. That too was turned down by Jerry Yang, as search is pretty much integral to developing a one-stop advertising platform on which marketers can place all types of ads.

The silver lining of a possible deal is visible to all. If it goes through, the deal would allow Microsoft-Yahoo to increase its combined share of the search market, in turn allowing them to boost prices that advertisers pay for ads.

The trouble with that would be how to split that revenue. Moreover, analysts have been quoted as saying that even if Yahoo received as much as 70 per cent of the ad sales, it would result in lower net revenue that would be offset by lower operating costs estimated between $750 million to $1.5 billion. That would be if it chooses to outsource search to Microsoft that would result in higher cash flow.

But, exactly what position Yahoo would be in thereafter is another contentious issue. The deal could well be the beginning of the end for the internet giant, since paid search, even today, notches up 40 per cent of the online advertising market. However, Yahoo is under enormous pressure to get some kind of deal going to pacify its plagued shareholders.

In the midst of all this, the one thing that is pure fact is that Google is the undisputed leader in search, with over 70 per cent of the US paid internet search revenues in its pocket, leading both Yahoo and Microsoft by miles. The only way the second and third place players can narrow that gap is by joining forces, since the only chance they do have, it together.