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After three months of stalled talks, reports the Wall Street Journal, Yahoo is still nowhere close to buying Facebook. the real question is no longer "when will Yahoo buy Facebook" but "why hasn't Facebook walked away?" And the answer is that Facebook must be more desperate than they pretend.

Facebook has to sell at some point. Just as with YouTube, it means nothing that Facebook's founder pretends his company could continue independently. In fact, it's much less likely for Facebook, which has a smaller user base, tougher competitors (YouTube was king of video; Facebook is still smaller than MySpace), and fewer immediate advertising opportunities. Internet traffic tracker ComScore says Facebook's traffic actually fell by over a million visitors last month.

But Facebook is too cocky to drop down to a $1 billion offer, which is all Yahoo's still offering. Both are playing chicken now, hoping that no third party approaches the other with a sweeter deal. In the meantime, other massive social sites like YouTube and MySpace soak up the benefits of major corporate ownership: stability, cash flow, and huge leverage in future deals with other conglomerates. And Google and News Corp are basking in the halo effect of their popular purchases.

So which will cave first, Facebook or Yahoo — or will Google snatch up Facebook too?

Yahoo's Talks With Facebook Get Bogged Down [Wall Street Journal, free]