When Terry Semel was hired to turn around Yahoo! (NASDAQ:YHOO), he believed it was critical to operate on simple principles. He wanted to focus on the core strengths of the brand and enhance them the best way by choosing the following: Buy, build, or partner.

Of course, Semel's strategy has been a success, as seen with smart moves such as the purchase of Overture. Now, Yahoo! may be looking at another purchase, for MarketWatch (NASDAQ:MKTW). Last week, The New York Times published a story in which there was speculation that the financial website is in talks with companies such as Dow Jones (NYSE:DJ), Viacom (NYSE:VIA), New York Times (NYSE:NYT), and, yes, Yahoo!

Why the interest? Well, despite a brutal bear market, MarketWatch has done a Semel-like turnaround itself. There was evidence of this in last week's third-quarter earnings report. Even though the third quarter is traditionally slow, the company posted $19.8 million in revenues, which was up from $11.6 million in the same period a year ago. Net income was $949,000, compared with $393,000 for last year's third quarter.

There is certainly a trend away from traditional media to online media for advertisers. And MarketWatch recently redesigned its site to improve its advertising exposure. MarketWatch has also diversified its revenues into areas such as premium newsletters and licensing.

There is another major initiative: MarketWatch and Thomson (NYSE:TOC) began a joint venture that will allow more penetration into the institutional market. Think of it as a mini Reuters/Bloomberg service.

As for Yahoo!, its finance portal is a key part of its business. No doubt, an acquisition of MarketWatch would add much more depth. In fact, much of the content offerings on Yahoo! Finance come from MarketWatch. MarketWatch also provides lots of content to AOL, EarthLink (NASDAQ:ELNK), Financial Times, and TheNew York Times.

Of course, a Yahoo! acquisition would mean getting the 5.8 million unique visitors of MarketWatch. And, more importantly, Yahoo! has the cash and stock to pay a premium.

Fool contributor Tom Taulli owns shares of MarketWatch but none of the other companies mentioned.