I have a source, that I can not reveal, that told me Google and Yahoo! are talking about a merger. This is a real reliable source, but if I tell anyone who it is, I am dead. I made a mention of it at this SEW Thread but didn't say anything else since then. Now I see Andy Beal heard the same thing, I would guess from the same source as I. He titled his entry Yahoo and Google Consider Merger?
It makes sense, they know Microsoft is coming at them strong. For both to survive, IMO, they need to team up. Yahoo! has a huge portal share, trying to be part of your life with search. Google has a damn good engine and a great brand for it, like Yahoo! If they team up, MSN has no chance.
How crazy can this be?
Update: Danny has more information in his blog entry named Google & Yahoo Plan Merger; Brin & Page To Depart.