Google still interested in Yahoo! as Microsoft steps up interest

LONDON - Google has said it is still interested in a tie-up with rival Yahoo! in the internet search market following news of a resumption of talks between Yahoo! and Microsoft.

It emerged over the weekend that Microsoft was considering a deal with Yahoo! that would not involve a full buyout.

The potential deal would involve Microsoft buying Yahoo's search engine business and a minority stake in the rest of the company, in an attempt to create viable competitor to Google.

Eric Schmidt, Google's chief executive, and the founders Larry Page and Sergey Brin met last night at the company's European "Zeitgeist" meeting in Hertfordshire to discuss a response.

When asked yesterday who Google's main competitor was likely to be, Schmidt said: "Eventually, I think it is obvious that it will be Microsoft, based on their actions."

Google recently ran a trial of its technology on Yahoo!'s US website, which was interpreted as a way of helping Yahoo! avoid Microsoft's clutches. As part of the two-week trial Yahoo! displayed some Google ads on its search pages

Brin said of the recent trial with Yahoo!: "Primarily we learned it was good to work with them again... and they have a very similar story to us and things went very well with that test so we would be very excited to work with them again."

Advertisers are hoping the talks between Yahoo! and Microsoft might lead to the full takeover Microsoft had been pursuing since making its $44.6bn (£22.6bn) approach in January.

As part of a complicated deal, Yahoo would spin off its Asian assets, which include a stake in the Alibaba Group, a Chinese internet company.

The ad industry is keen to see a deal done between Yahoo! and Microsoft because it would help dislodge Google's dominant position in search.

Google has seen its share of all internet search queries in the UK rise by three percentage points year on year in March to 80%, acording to the latest figures from Nielsen Online.