While clearly not a strategic move to overtake Google, the merger could be a good thing according to the Insider:
Yahoo and AOL should merge: AOL has some valuable assets–AIM, ICQ, mail, premium properties, MapQuest–but it has no place in the current portal wars. To stay relevant, AOL needs to combine these assets with one of the other players, and the Yahoo combination makes the most sense.
However, as the Insider points out as well, a deal between Yahoo and AOL couldn’t take the place of a Microsoft/Yahoo deal. Like the News Corp deal, an AOL deal would be severely lacking in cash, especially compared to Microsoft’s offer.