A MSN/Yahoo deal doesn’t make much sense. Google and Yahoo makes more sense, although that wouldn’t be ideal for search marketers, as that would not leave us with much leverage.

“We’re going to claim ownership of this idea: that the right partner for Yahoo isn’t Microsoft, but Google. A JP Morgan analyst, cited in Barron’s, estimates that Google’s more liquid exchange for text ads, if brought to bear on Yahoo’s search results, could add more than $1bn to the Sunnyvale internet company’s 2008 earnings. That would create more value than any other possible deal for Terry Semel’s lumbering internet portal.

Barron’s Eric Savitz thinks the deal could get past the anti-trust authorities, because a combination of the two biggest internet media companies would still have only 4% of the US advertising market, if one includes both online and traditional media.

Valleywag’s idea, first floated in January: just do a long-term deal to bring in Yahoo’s search engine as an affiliate of Google’s Adwords search marketing business, which would be less obviously monopolistic, as well as less convoluted; and do a deal soon, before the government wakes up to the fact that Google will soon be way more powerful than Microsoft.“