Did we speak too soon? The blogs have been buzzing about Yahoo today in the mergers market, with two very different possible scenarios. The first involves Yahoo buying AOL, the second has Microsoft buying Yahoo. Is there any credibility in these reports?

First, to the possible purchase of AOL by Yahoo. The only possible reason a company like Yahoo would be interested in buying AOL would be to acquire its user base (buying eyeballs, in effect) to grow its advertising revenues. There is no denying the fact that AOL is past its prime, shedding customers and losing market share. For Yahoo to buy AOL, it would be the equivalent of eBay buying Skype (a non profitable service, but one with millions of users). As such, there may well be some truth to this.

On the second story, Microsoft buying Yahoo, this type of a move would certainly make sense from Microsoft's perspective. In buying the most popular Internet property, Microsoft would essentially position itself (finally) as a viable online competitor to Google. Microsoft is a Johnny come lately to the Internet, and must now either pull a rabbit out of the hat in application terms to compete (unlikely), or buy its way to the top. That is what makes this a credible story - Microsoft is running out of options.