Yahoo’s life-saving revenue-enhancing alliance with Google, supposedly set to kick off in a week and substitute for a Microsoft buy-out, has been put on hold while antitrust regulators at the Department of Justice continue their investigation. The companies issued separate statements late Friday saying they had agreed to a "brief delay in implementing the agreement," after the Wall Street Journal had teased out as much from unnamed sources.

Reuters thinks the delay will last less than a month and that the companies are still contemplating an October start although the news wire quotes an antitrust lawyer as saying the development isn’t a good sign for the future of the deal.

The pair previously struck the position that they would go ahead despite the on-going antitrust review and Google has as much as said that it is resistant to any changes in the terms of the deal, suggesting they would be difficult to restructure.

The DOJ can wave the deal through, demand restrictions or sue to block it. It could start by asking for an injunction.

Under the arrangement Google is supposed to match ads to search queries made over Yahoo sites in the US and Canada and split the fees, bringing Yahoo an anticipated $800 million a year. Yahoo and Google together control over 80% of the US search market. Microsoft, which has been lobbying to stop the Yahoogle tie-up, controls a mere 8.3% and critics have suggested that Google will simply swallow Yahoo up, giving Google monopoly control of ad rates.

Canadian antitrust regulators have recently gone down the same path as the US Justice Department, hiring an outside litigator, David Kent, a Toronto antitrust expert, to look into the deal.

The DOJ hired veteran litigator Sandy Litvack, the head of its antitrust unit under the Carter administration, a few weeks ago to put a case together.

A few days ago Yahoogle was able to get 11 US congressmen from California, roughly 20% of the state’s delegation, to write a letter to the DOJ warning the agency not to mess with the deal lest online advertising and e-commerce be impaired and similar agreements ­ passed off as commonplace ­ chilled.

But that was after 10 members of the House Judiciary Committee wrote the DOJ telling it close scrutiny was in order. Then Thursday the Senate’s antitrust subcommittee did the same thing, saying that even if the DOJ concluded that the partnership doesn’t violate antitrust law it “must be sure this deal never in the future crosses the line into an unacceptable, anti-competitive collaboration among competitors which will harm consumers and advertisers.”

Meanwhile, Yahoo ­ which may be looking into its crystal ball and divining an antitrust rout ­ has hired Bain & Company to explore “ways to streamline our processes and bring new agility and efficiency to how we work as an organization” ­ which what’s left of the smart money reads as layoffs.

Yahoo CEO Jerry Yang told his folks in an e-mail that the company needs “more discipline…getting fit now will enable us to be more successful moving forward.”

Stanford Bernstein analyst Jeff Lindsay thinks a “few thousand” could be let go. He says advertisers have already stopped buying ads directly from Yahoo for some of its most prominent sites like Yahoo Financial and that Yahoo has ~4,000 sales reps.

US advertising spending was also down 3.7% last quarter, the worst drop in seven years, according to Bloomberg. Spending on Internet display ads was up only 8% in the first half, down from 18% year-over-year.

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