I’m running a little late with this post today but given the level of speculation in the search media surrounding rumours of another round of Yahoo! / AOL negotiations, I’m glad to be in a position to place a well informed second-thought opinion.

This is an interesting story, no matter how it turns out. According to a Fortune.com report published on the CNN Money website early Saturday afternoon, Yahoo! is interested in coaxing AOL away from Time Warner. Authored by Tim Arango and Adam Lashinsky, the piece has generated a great deal of discussion in the search marketing community.

The article comes early to the conclusion that the status quo is deadly for Yahoo!, outlining several options facing CEO Terry Semel. One of the options suggested sees Semel putting Yahoo! up for sale to Microsoft or to Google, depending on which was willing to part with the most money to keep Yahoo! out of the other’s hands.

What a difference a year makes. Last year, Yahoo! was solidly number two to Google. It still is in almost every respect except for that all essential element of business success, respect.

In the great schoolyard of Internet business, all the kids know Yahoo! has a glass chin. To make matters worse, it can no longer hide behind its own bulk because the other kids have gotten big too. Faced with a listless performance exiting the third quarter and lowered expectations from the search advertising community, Yahoo! has got to do something extremely cool as quickly as it can.

Trying to do something cool when you are a big time mainstream corporation is often more difficult than one would imagine. It’s not that Yahoo! lacks cool staff with imaginative ideas, and it’s not that Yahoo!’s staff isn’t tough enough to beat Google staff from time to time. (Word has it, Yahoo! trounced Google in an intramural softball game late last summer) The problem is that Yahoo! appears to be structured in a way that limits the maneuverability and risk-taking ability of its staff.

Take one of the other great Yahoo! rumours floating around the media this month, Yahoo!’s motions to purchase Facebook as an example. Though a possible connection between Yahoo! and Facebook has been speculated on for several months, talks between the two firms are said to be slowing on news Yahoo! wanted to lower its purchase bid. The length of time it has taken Yahoo! to get a deal together seems far longer than it would take for Google to strike a similar deal. That’s likely because Yahoo! has a more complicated business than Google does.

Though buying Facebook today seems silly in light of a reported downturn in that section of the social networking market. Spending any money on Facebook at this point is not wise unless Facebook is able to reinvent itself and re-invigorate the social networking market. Nevertheless, Yahoo! still suffers a short-term perceptual downturn for not closing that deal and gaining the million more eyeballs that would come with it.

Now speculation has shifted to AOL. Will Yahoo! buy AOL? Probably not. AOL is likely just using Yahoo!’s attentiveness to get Google’s attention. This wouldn’t be the first time Time Warner’s board has played that game with Yahoo!. One thing nobody writing about this rumour has mentioned is that Fortune.com is owned by Time Warner which itself owns AOL. Indeed, though the Fortune article suggests AOL and Yahoo! are discussing AOL’s worth, it also states, “Time Warner has a new strategy for AOL and is not contemplating any deals,” says a company spokesman.”

So what is Yahoo! going to do? That is a good question that does not have an easy answer. It is not likely to give up the fight though. Though Yahoo! might have lost market share to Google, it has never conceded a marketable channel in its history.

As for the search advertising market, Yahoo! just spent a great deal of time, effort and credibility in the development of its advertising platform Panama so obviously the lucrative world of PPC advertising remains a high point in Yahoo!’s priorities.

To say Yahoo! is going to do something is as easy as predicting the coming of spring. They have all the resources they need to do something cool but as of the beginning of the end of this year, they seem to have trouble deploying them. Here’s to hoping for a competitive New Year in the search marketing scene. (While we’re at it, anyone know the odds on the Leafs winning the Cup this spring?)