Yahoo! has dipped out of a possible tie-up with AOL after the pair couldn't agree terms, the WSJ reported yesterday.

The giant portal with its distinctive "!" admitted that the bosses of both companies had met last month to discuss a possible deal but that there wasn't enough common ground.

Yahoo! made no formal offer, it said.

With Yahoo!'s position now clear, it paves the way for a two-horse race between favourite Microsoft and Google, although Google may or may not launch a bid in conjunction with cableco Comcast. ®