Rumours rife as AOL cosies up to MSN

Reports suggest an imminent AOL/MSN partnership

AOL and MSN have had talks on co-operating in their search and advertising network businesses, according to a report in the Financial Times.

The news follows speculation that Time Warner, the owner of AOL, is in advanced discussions to sell a stake in AOL to Microsoft.

AOL was recently relaunched as a free portal, and both AOL and MSN have seen a decline in dial-up subscribers.

Julian Smith, European online advertising analyst at Jupiter Research, said: "It appears that both are struggling against the likes of Yahoo and Google, so this is perhaps a logical defensive action which could boost advertiser numbers by combining the subscriber base."

The move comes soon after MSN launched an advertising option similar to Google's AdWords in a bid to catch up with the model created by the search giant.

Other analysts speculate that links between the two could increase the probability of a closer merging of their instant messaging platforms.

"Communications such as instant messaging and VoIP are becoming increasingly important, so that will be a target as well," said Smith.