However, while many at both companies see value in a deal, given content, video, and ad synergies, Mayer reportedly considers it "small, unexciting, uninspiring and backward-looking."
Mayer would, however, like to buy the Huffington Post. But Armstrong is said to be uninterested in selling the site by itself.
The report follows a Sun Valley talk between Mayer and Armstrong that fueled speculation the CEOs were talking about a deal.
Yahoo's Q2 report arrives tomorrow. The Street is hoping some clarity will be given on Yahoo's plans for its Alibaba IPO windfall.