While the two units were combined, a potential acquisition was difficult as buyers struggled to find a proper fit for both parts of the AOL unit within their businesses. By splitting the two, Time Warner can now seek interest from separate buyers and potentially increase the yield from the sale.

Both Yahoo! and Microsoft have quite publicly expressed interest in the AOL online advertising division, with Microsoft Execs visiting AOL HQ as recently as mid July.

Whilst I initially thought that Microsoft would use an AOL acquisition to make a Yahoo! merger more attractive for Yahoo!’s shareholders – it looks like both companies might make independent plays for AOL’s online advertising and content unit.

As I shared in our July post about Microsoft’s interest, AOL represents about 11% of US online revenue and is valued at over US$8.3 billion. AOL sites generate over 56.5 million uniques per month – which is some serious traffic and exposure.

Should Microsoft or Yahoo! successfully acquire AOL’s online advertising division, it would provide the respective company significant ground in the ongoing battle against search engine behemoth Google.

Given AOL’s Platform-A is considered the top advertiser network by comScore, the winning buyer would make a sizable gain in an ad market dominated by Google.

Reports suggest Time Warner will formally announce the AOL split on Wednesday, which will be like waving a “buy me” red flag at two seriously keen bulls. I wouldn’t put it past Google to pop up at the finishing post in this race to win the AOL business.

Stay tuned, as this is sure to heat up over the coming weeks.