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Even with the failed Yahoo deal ringing in everyone's ears, it is thought discussions were underway between Microsoft and AOL even before the Yahoo deal fell through.

 So now it seems Microsoft are interested in AOL as the Plan B to buying Yahoo.
According to the report, AOL's revenue last year was US$5.2 billion making it a significantly cheaper potential target for Microsoft than Yahoo ever was.

And if this deal did succeed, Microsoft would get around 85 million unique visitors a day, an expanded advertising business and potentially a way to stop the talks that Yahoo are having with AOL.

Analysts in the US have remarked that it is now obvious to all and sundry that Microsoft cannot challenge Google without acquisitions, or perhaps are just not prepared to wait and build a Google-clone on their own.