Google's co-founder Larry Page respects Yahoo's struggle to remain independent, and he says there's still a chance an advertising deal between the two companies can work.

Speaking at an event on Thursday in Washington, D.C., Page said a deal could be structured to help Yahoo maintain its independence without violating antitrust laws. Page acknowledged that Google has a significant share of the advertising market, but he said "there are ways in which to structure a deal with Yahoo that would be reasonable". He added that Yahoo's alternatives aren't great either.

"Yahoo wants to remain independent," he said. "We support that. On the other hand, they're in a difficult situation."

Google and Yahoo have been discussing and testing an advertising partnership. As part of this deal, Google would supply some text ads alongside Yahoo search results. The companies both seem satisfied with results from a two-week test. However, a partnership between the two companies has stalled due to antitrust concerns.

Meanwhile Yahoo has also just fended off a takeover bid from competitor Microsoft. Now the software giant is looking at ways to get a smaller stake in Yahoo. At the same time, Yahoo is dealing with pressure from activist Carl Icahn, who believes the company should have taken the Microsoft bid.

Google has been opposed to Microsoft's bid for Yahoo from the start. Page said that a combined Microsoft and Yahoo would control too much of the market, and as a result would stifle innovation and slow development of new products and services.

"You can't have one company control 90 percent of the market, especially one that has a history of doing bad stuff," he said.

He used instant messaging as an example. He said that unlike e-mail, which allows people to send and receive messages from different e-mail providers, IM is still closed. (Microsoft's Live Messenger does interoperate with Yahoo Messenger, but it doesn't use an open protocol, such as Jabber.

"We think that's stupid," he said. "It doesn't foster competition. If you want good products you need some degree of openness."