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Yahoo announced earlier in the week that it was planning to trial an advertisement sharing scheme with Google, which sent analysts into a spin predicting a possible three way alliance with AOL.

Hours later, Microsoft trumped the announcement with the New York Times reporting that MySpace owner News Corp was in talks to join Microsoft's bid for the web company.

"Everyone is just exploring. The best option is to accept the Microsoft deal. I just see Yahoo as a mature brand and AOL as a

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declining brand" says fund manager Mike Binger at Thrivent Financial, which owns small stakes in Yahoo and Microsoft.

Exploring they certainly are, with sources reporting the board is meeting up to three times a week to discuss options. The board is expected to meet on Friday, though no big decisions on the AOl acquisition - valued at $10 billion - are expected until next week.

"The structure of the AOL deal is likely to be less appealing to Yahoo shareholders than the straight-forward Microsoft bid," says Jefferies & Co analyst Youssef Squali. "We believe that a clean acquisition of Yahoo by Microsoft is still the most likely scenario."

UBS analyst Heather Bellini agrees that Yahoo management will have a difficult time convincing its shareholders that the AOL deal is worth more than Microsoft's offer.

A joint Microsoft-News Corp bid could create a more formidable competitor to Google, but Bellini notes that there would be an increased risk over integration.

Microsoft, News Corp, Time Warner, Google and Yahoo have all declined to comment on the talks.