Even though Microsoft was unable to purchase Yahoo outright last year when Jerry Yang was in control of the slumping Internet search giant, Microsoft CEO Steve Ballmer is chatting with Yahoo regarding a possible advertising deal.

Although unconfirmed at this point, it's possible Yahoo search ads would be sold by Microsoft as Yahoo manages all of Microsoft's display ads.  Both companies have lost ground to Google, and a possible ad deal should help Microsoft and Yahoo to claw into a dominant No. 2 position.  More importantly, this could open the door for both companies to work together in the search advertising market, with both companies far behind Google.

This marks the first time the two companies discussed a possible deal since Yahoo turned down Microsoft's buyout offer in 2008.  Now that Yahoo has a new CEO, Carol Bartz, analysts expected the two sides to begin negotiations regarding possible business deals immediately -- Ballmer and Bartz have talked just once since January.

Last month, Bartz said any and all talks with Microsoft would remain private, as to not tip off Google to any pending deals aimed at the Mountain View-based company's dominance.

Microsoft is working on Kumo.com, a new Web search engine, and a confirmed deal with Yahoo to work on the new MSN.com replacement may help in new advertisers.

Microsoft made an unsolicited offer of $47.5 billion last year, and though both sides were in serious negotiations, Yahoo believed the offer was undervalued.  The deal eventually fell apart, and caused stockholders and executives to force Yang out of the company.

Ballmer became interested in Yahoo's search business, but that deal was unable to come to fruition as the two sides couldn't agree to a fair price.

Both Yahoo and Microsoft declined to talk to reporters about the possible conversations -- and negotiations between the two companies could easily fold yet again.