According to a report in the Wall Street Journal today, Google may be getting cold feet. In a last-ditch effort to avoid a merger with Microsoft, Yahoo said it was considering teaming with Google in a search advertising deal. But some Google executives are now questioning whether that’s a good idea

Google knows any deal with Yahoo will face tough scrutiny from regulators in Washington and the European Union.

Last month Yahoo ran a two-week test displaying some of Google’s search ads on about 3% of Yahoo’s traffic. Both Yahoo and Google said the experiment went well. The two are reportedly in talks to outsource Google’s search technology in a non-exclusive arrangement.

Could Google have entered into the test with Yahoo to simply break up Microsoft’s acquistion of Yahoo?

Microsoft CEO Steve Ballmer admitted that Google was a factor when it walked away from Yahoo

In a letter  to Yahoo CEO Jerry Yang, Ballmer said his company would not be willing to deal with the “host of regulatory and legal problems” that it would inevitably inherit if Yahoo partnered with Google.

Last month Microsoft’s general counsel Brad Smith lashed out at the two big Internet sites for partnering even in a limited test. He argued that a Google-Yahoo combo would give Google a 90% share of online search advertising and that “this would make the market far less competitive.

Microsoft would aggressively lobby against a long-term partnership between Google and Yahoo.