Yahoo has partnered with online discount broker Groupon and more than a dozen other similar services in an effort to boost the company’s earnings, increase ad revenue and strengthen its grip on the more than 500 million worldwide users who visit Yahoo’s website. Yahoo is currently testing offers of local business deals from Groupon and other services in various U.S. cities.

Rumors of Yahoo and Groupon joining forces have been circulating for some time now. Back in October, many analysts speculated that Yahoo was planning to purchase Groupon in a $2 billion deal. However, technology blog TechCrunch quickly put those rumors to rest by reporting that Yahoo wasn’t looking to acquire Groupon but rather developing a partnership with the bargain-smart website.

Latching on to Groupon is a wise move for Yahoo who many believe is vulnerable to a possible takeover. Groupon is reportedly seeking venture funding that may value the company at up to $3 billion. As it stands, Groupon has more than 20 million members. The company was launched two years ago, in November 2008, initially serving the Chicago market only. Groupon also owns several similar international operations, including the Europe-based MyCityDeal, the Japanese service Qpod.jp and the Russian Darberry.ru.

Earlier this year, Groupon raised $135 million in funding from Digital Sky Technologies (DST), a Moscow, Russia-based firm that invests in new Web technologies. Aside from DST's investment, Groupon has also raised a total of $170 million from other companies, include Facebook investor Accel Partners and New Enterprise Associates.

In contrast, Yahoo recently revealed another quarter of less-than-impressive revenue results, according to industry observers. Yahoo reported revenue of $1.6 billion for the third quarter of 2010, a mere 2 percent increase from the third quarter of 2009.

Edited by Tammy Wolf