Yahoo! Is Out of Time

If the sources fueling a report in Thursday morning's edition of The Wall Street Journal prove true, it looks like we just missed out on what would have been a gargantuan Internet deal. Yahoo! (NASDAQ:YHOO) had supposedly offered a 20% stake to Time Warner (NYSE:TWX) in exchange for an 80% stake in AOL's booming non-access business.

It was a deal that would have been valued at roughly $13 billion. Neither company is officially admitting that the offer was made, but a Yahoo! spokeswoman told the paper that her company had withdrawn from the bidding war for a minority stake in AOL.com after learning more about the proposed deal terms.

That leaves Google (NASDAQ:GOOG) and Microsoft (NASDAQ:MSFT) as the remaining players for a healthy chunk of the AOL.com empire that includes popular online destinations like Mapquest.com and MovieFone, as well as AOL's popular online chat interface.

Google supposedly partnered with Comcast (NASDAQ:CMCSA) to enter into negotiations with Time Warner after news broke that Microsoft was looking to beef up its search engine and nascent paid search business by partnering with Time Warner's online arm. Google's entry was logical. It was out to protect its turf, as AOL accounted for 12% of Google's revenues last year.

Losing out on AOL's breadth (it serves up pages to 110 million unique monthly visitors) would be troublesome in more ways than the obvious. Google continues to grow its organic presence quicker than its third-party network's reach, but AOL is still crucial real estate. More importantly, handing AOL to a competitor like MSN or Yahoo! would make Google less of the globally dominant force that it has become.

The past few months have been a dot-com land grab, with Internet and traditional media heavies bidding up small, yet attractive properties like Skye, About.com, and Flicker. It was really just a matter of time before the heavyweights started to hook up with their own kind.

Yes, America Online's dial-up business continues to fade with every passing quarter, but the AOL.com division is the ever-widening Rubenesque belle of the online ball. With Time Warner drooling over the notion of cleaning up its balance sheet by marrying off the hand of its suddenly popular daughter -- or at least a finger or two -- a deal is going to happen. Bet on it.

However, if Time Warner's demands were enough to scare Yahoo! away, it may be an endurance test now between Microsoft and Google. Let's hope, for Motley Fool Stock Advisor recommendation Time Warner's sake, that it doesn't get too greedy.

With just two suitors now waiting on the porch popping Altoids, Time Warner can only afford to lose one more interested admirer before this becomes a shotgun wedding.

Longtime Fool contributor Rick Munarriz hates to see good companies duke it out, even when he has ringside seats. He does not own shares in any of the companies mentioned in this story. T he Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.