It's Good to Be Google

Many observers view the potential of a longer-term arrangement to help Yahoo! by pumping more revenue back into the company.

Friedland says he doesn't see Google gaining much from a deal, although the threat of one helped derail Microsoft's (MSFT Quote - Cramer on MSFT - Stock Picks) attempt to merge with Yahoo!, which is what Google wanted. Microsoft maintains that any tie-in between Yahoo! and Google would undermine Yahoo!'s own ability to make any headway in the search advertising market.

Friedland says Yahoo! stands to benefit far more than Google if the two end up making a deal, and it could also allow Yahoo! to invest back into its own business and make it stronger against Google.

Goldman Sachs analyst James Mitchell, however, sees a potential upside for Google.

"Using 2009 metrics, we estimate that Google could pick up $300 million in net revenue from Yahoo!'s own searches and $660 million from capturing Yahoo!'s current search affiliates, for a total net revenue enhancement of $960 million," he wrote in his recent research.

Neither Yahoo! nor Google has commented on a possible agreement.

What is ultimately the tough decision now for investors is: where does the stock go from here? Having shed many worries that sunk the stock earlier in the year, does Google make a quick return to its lofty $700 level, as UBS, which raised its price target to that mark on Thursday, suggests?

That's not an easy prediction, following a week where the broader market lost ground for the first time in four weeks, while Google itself seemed to be consolidating after its $75 post-earnings day jump.

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