Microsoft and Yahoo are close to a long-discussed search and online advertising deal, which could be announced in the next week, according to another source familiar with the matter who is not associated with Icahn. The news was first reported by the AllThingsDigital blog, which said a deal would involve Microsoft paying Yahoo several billion dollars upfront to take over its search advertising business and guarantee certain payments back to Yahoo. The two companies have talked about cooperating for months, after Microsoft’s bid to buy Yahoo was rebuffed last year and Yahoo’s attempt to seal a search advertising deal with Google Inc fell apart under regulatory scrutiny. Yahoo Chief Executive Carol Bartz said in May that any deal to spin off or combine its search assets will require a partner with “boatloads of money.” She said at the time that Yahoo was talking “a little bit” with Microsoft, but gave no details. Bartz is currently out of the office for two weeks, following knee replacement surgery, according to an email that she sent to her employees earlier this month. Icahn, whose firm had a 5.4 percent stake in Yahoo as of March 31, said he remains a “strong supporter” of Bartz, who took the reins in January from Yahoo co-founder Jerry Yang. Bartz has made a number of changes since joining Yahoo, including shutting down underperforming websites and laying off 5 percent of the Sunnyvale, California company’s staff. But many investors continue to see a deal with Microsoft as Yahoo’s best option, saying it will cut costs and create an online entity big enough to better compete with Google, the top search company in the United States.

The latest discussions involve a partnership in which Microsoft would handle search capabilities for Yahoo, while Yahoo could potentially handle online advertising for the two online sites. According to Kara Swisher, co-executive editor of AllThingsDigital, a group of high-powered Microsoft online executives flew to Silicon Valley on Thursday to iron out remaining issues related to technology deployment. They included Senior Vice President of Online Audience Business Group Yusuf Mehdi, search head Satya Nadella, top digital executive Qi Lu. Representatives for Microsoft and Yahoo declined to comment. Yahoo is scheduled to report quarterly results next Tuesday, and Microsoft on Thursday. Microsoft withdrew its $47.5 billion offer to buy Yahoo in May 2008 after Yahoo’s board said the price was too low. The software giant then offered to buy Yahoo’s search advertising assets for $1 billion upfront, and guarantee $2.3 billion in annual revenue for five years, in a proposal backed by Icahn. Google is the dominant player in the search market, with a 65 percent market share in June, according to comScore. Yahoo was second with 19.6 percent, while Microsoft was third with 8.4 percent. While Microsoft’s share remains small, its new search engine Bing has won positive early reviews.

As people search out advice online for everyday, personal decisions, the standard list of links served up by Google is not seen as intimate or trustworthy, Google Group Product Manager Ken Tokusei said Monday. For decisions such as choosing a restaurant or a day care provider, social networking sites or known review sites have an advantage, he said.

Such sites offer information from friends or acquaintances, and Tokusei said users tend to trust that information more. This puts Google’s results at a disadvantage.

“We haven’t gotten to the point where results are seen as if they come from someone you know,” he said.

The search giant has begun to offer tools for users to rate results and delete unrelated links, but it still has work to do, he said.

As Internet users gain savvy and experience, they also expect better-honed answers to queries. Sites such as WolframAlpha, launched earlier this month, comb the Internet for data, and analyze it to provide specific answers to queries, rather than a list of sites.

Google Inc. does something similar for some searches, providing price quotes for “Sony stock” or an answer for “Tunisia capital.” But it also provides the familiar list of sites to dig further, a strategy it is unlikely to change.

“It’s a matter of determining what kind of information the user is looking for. But we will always serve some links to pages with our results,” said Tokusei.

He spoke to reporters at Google’s Japanese headquarters in Tokyo, where he gave an overview of the company’s basic search tools.

Google has developed a host of expanding tools and services, from a mobile operating system to an online word processor, but it devotes 70 percent of its employees and resources to search.

The company still faces fresh competition from its traditional rivals, which are regrouping in an attempt to take back market share.

Microsoft has failed to make much headway in repeated Internet ventures. But the deep-pocketed company, which has poured hundreds of millions of dollars into improving its search engine, continues to develop a new search technology, part of which is called “Kumo” internally.

Yahoo, which has seen its share of total online searches conducted plummet to Google, is tweaking its search results, cutting out some links and emphasizing images and video.

Microsoft Chief Executive Steve Ballmer has said he is still interested in buying part of Yahoo after a proposed deal was turned down last year.

Yahoo has had conversations with companies about partnerships and “more interesting” possibilities, said Balogh, who is executive vice president of products at Yahoo. “I can guarantee you there will be some acquisitions, and we will do some stuff in house,” said Balogh, speaking by videolink to the Reuters Global Technology Summit in New York. Yahoo will introduce new products this fall that will make its network of websites easier to use and showcase the company’s strategy to grow again, he said.

The company is striving to revive its fortunes as sales decline because of the recession and competition from other Internet heavyweights, including Google Inc. In January, Carol Bartz took the reins as Yahoo CEO, succeeding co-founder Jerry Yang.

The software giant has been testing a new version of the service internally under the name of Kumo.com and it may become part of the firm’s attempt to catch up with Internet search leaders Google Inc and Yahoo Inc. Microsoft has hired JWT, a unit of WPP Plc, to develop an advertising campaign for the product, the paper said, citing people familiar with the matter. The search engine is expected to be unveiled at the “D: All Things Digital” conference. Microsoft was not immediately available for comment.

Yahoo, the leading provider of online display advertising, has been under pressure for nearly a year as it held fruitless merger or partnership talks with Microsoft Corp, Google Inc and Time Warner Inc’s AOL.

The new services include targeting graphical adverts to users who have searched for particular terms in Yahoo’s search engine and customizing the offers in adverts based on what Web sites a consumer has visited and what they have done on those sites, the paper said.

Another service that is expected to go live next month will allow marketers to buy text adverts next to search results that are targeted to users during a certain time of day or based on factors such as their age and gender, according to the paper. “Targeting a site with a couple hundred thousand users…I don’t call that targeting. I call that wasted effort,” the paper quoted Joanne Bradford, Yahoo’s senior vice president of US revenue and market development, as saying.

“Size does matter.” Bradford and Michael Walrath, a senior vice president at Yahoo, will discuss the new features during a keynote address at a conference in Orlando, Florida, on Tuesday, the paper said. They will also use the speech to urge marketers to stop thinking about search and display advertising as separate products and to take advantage of tools such as Yahoo’s search-targeting product to bridge the two, the pair told the paper in a joint interview.

“There is a lot of clutter on the web and with this, publishers will be able to clean up a lot of junk,” said Matt Cutts, an engineer who heads Google’s spam fighting efforts, the New York Times reported.

“I think it is going to gain traction pretty quickly,” said Cutts.

The problem is the following: Many web publishers, especially those that have voluminous sites, like e-commerce companies, have multiple URLs that all point to the same page. This confuses search engines, sometimes causing them to index the same page multiple times. As much as 20 percent of URLs on the web may be duplicates, according to some estimates.

Engineers at Google came up with a simple way for web publishers to indicate when a URL is a duplicate, and if so, which is the principal, or “canonical,” URL that search engines should be indexing. Yahoo and Microsoft, the no. 2 and no. 3 search engines, have agreed to support the same standard.

“We are happy that everyone is going to support the same implementation,” said Nathan Buggia, a lead program manager at Microsoft. “This is a clear benefit for publishers as it gives them an opportunity to get more exposure through search engines.”

All search engines have developed technologies to detect duplicates that are more or less effective. The so-called Canonical Link Tag, as the standard is known, should make it easier for both publishers and search engines to address the problem, NYT reported Thursday.

“It is an important step because all the search engines are coming out with it,” said Priyank Garg, director of product management for web search at Yahoo.