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Yahoo! and Facebook in alliance talks?

The Sunday Telegraph has reported that the chief officers of both Facebook and Yahoo! have engaged in talks over how the two web colossi can work more closely together going forward. But this report was later refuted by an article from AllThingsD which reasoned that a long standing contract between Yahoo! and Microsoft will make such a union unlikely.

The Telegraph credited an unnamed source for its information, which asserts that the chief executive of Yahoo!, Marissa Mayer and the chief operating officer of Facebook, Sheryl Sandberg have held discussions over establishing a partnership.

The rationale behind such an agreement is predicated on Facebook's desire to provide a better search function for its users, in a bid to ingratiate the social network into everyday life to an even greater extent.

"Facebook is pretty uniquely positioned to answer a lot of questions people have 'what sushi restaurant friends like'. These are queries you could potentially do on Facebook if we built it out ... at some point we'll do it ... we have a team working on search," noted founder Mark Zuckerberg at an industry event held earlier this year.

An improved search facility would also aid in "targeting advertising more efficiently".

Yahoo!, on the other hand, would gain access to Facebook's 1 billion plus subscribers, which will aid its quest to capture market share form search leader Google. This is because the algorithms used in search engines have a proportional relationship with its user-base – the more people that use it the more powerful it becomes.

The struggling search firm would also benefit from a greater pool of programmers, whether it is from sharing personnel or becoming a more attractive prospect to top-tier talent due to its new affiliation with the currently more successful Facebook.

AllThingsD, however, has discredited such postulations as it cites its own sources who say that such an alliance is not taking place due to Yahoo! remaining committed to its search partnership with Microsoft.

The two firms came to terms in 2009, with the ten year agreement seeing Bing – Microsoft's search engine – becoming the source engine for Yahoo!'s search results, therefore allowing it to focus on gaining ad revenues.

The partnership has done little to eat at the dominance of Google which still holds 66 per cent of the market, with Bing only holding 16 per cent. Recruitment has also continued to remain lacklustre as both companies struggle to keep hold of skilled labour.

The report goes on to mention that Mayer has contacted Yahoo!'s Redmond-based partners in an effort to improve their alliance and address performance concerns.