The way the game of mergers and acquisitions is typically played involves the carefully measured use of speculation seeding -- the fine art of making the other side wonder what you're going to do, without having to actually amass the real tools to do it.

ANALYSIS Yesterday, Yahoo revealed it can play this game quite masterfully. In an almost effortless stroke of gamesmanship, the Web portal leader announced it would test giving Google an extra outlet for its AdSense for Search, and then in the same statement pronounced quite sternly that by no means should anyone take this to mean anything permanent is taking place...because after all, Yahoo maintains the right to explore all its alternatives.

As recently as last Friday, major financial analysts were pronouncing the Microsoft + Yahoo merger an inevitability, publicly advising Yahoo CEO Jerry Yang on CNBC that afternoon that he may as well face the music: With an offer as good as Microsoft's, and with shareholders wanting their ROI, what else could Yahoo possibly do to survive?

Well, we have our answer now: Yahoo can rotate just one mirror, and suddenly the entire hallway looks completely different. There is now at least one possibility on the table for how Yahoo could not only survive on its own, but thrive; and Microsoft's response, which appears to have been to seed the name of Rupert Murdoch into the discussion -- with the outlet for that seeding being The New York Times -- actually appears awkward and, with apologies to Donald, trumped up.

The newly revealed, plausible theory looks like this: Time Warner -- which has been pondering this idea publicly anyway -- could spin off its AOL unit into a separate company. That firm, precisely one minute later, could merge with Yahoo, with Time Warner potentially making a cash investment to help it get off the ground.

The result would be an NBC Universal-like combination: There, two corporate parents -- General Electric and Vivendi -- spun off their media divisions, enabled them to merge with one another, and then took cash stakes in the product -- GE with the majority stake, Vivendi with a smaller but sizable stake with the option to sell over time.

Yahoo's name-dropping of Google yesterday, without Google having to lift a finger, adds firmament to this plausibility. It already has a 5% stake in AOL, which could conceivably be transferred to the new Yahoo + AOL combination. Google could add a few billion more, seeing as how it has some cash left over from all that 700 MHz spectrum it failed to procure. Google would then have a major new outlet for its textual advertising services, and perhaps even its newly acquired display ad services through DoubleClick, plus the renewed satisfaction of having once again thwarted Microsoft's attack.

But what would the value proposition be for Yahoo's shareholders, who would eventually have to approve the deal? The sale could be made on the basis of Yahoo and AOL being a much better fit for one another. First, Yahoo acquired a unique advertising exchange last year called Right Media, where ad space from multiple online publications is pooled together and auctioned off to high bidders. It's a very lucrative concept, though to become viable in the long-term, that pooled together space has to be more valuable than just "remnant inventory," which is what it is now.

Enter AOL. Since last year, it has been reworking its AOL Video platform into a way to capture refugees from commercial television, which despite its higher definition of late has been plagued by a lesser constitution of quality. AOL has had at least some success in solving the riddle of transitioning traditional TV viewers into Internet users; at least, it's had more success at this than Yahoo, whose failure to break into the content generation market is what triggered Yang's reclaiming the CEO post in the first place.

AOL's library of video content from production company libraries and user-generated storehouses, meshed with Yahoo's still-strong portal, intertwining with both Yahoo- and AOL-hosted sites through either or both hosts' new advertising platforms, and fueled by revenue driven by Yahoo's Right Media exchange, could be perceived by investors as a far stronger combination than anything Microsoft could conjure.

After all, Microsoft already publicly stated that it's not really interested in Yahoo's technology or its recent acquisitions, just its employees. Thus we already know, without resorting to speculation, that a Microsoft + Yahoo combination would result in a tremendous trimming of assets, whose collective value may become more evident to investors in light of the context of a Yahoo + AOL combination.

With the latter combo, there at least wouldn't need to be a trimming: The new company would need every last scrap of what it could put together.

Next: The case against AOL + Yahoo...