Microsoft is close to inking a deal that would make it Verizon Wireless’ preferred mobile search engine, according to a report. 

The software giant is about to snatch the Verizon Wireless deal away from Google, which had also been in talks with the carrier set to become No. 1 in the United States at the close of its Alltel acquisition.

The Microsoft-Verizon tie-up was reported by The Wall Street Journal on Wednesday. The move would give the Redmond software giant a strategic boost in the mobile ad wars. 

Yahoo two montha ago landed a mobile search deal with No. 1 U.S. carrier AT&T. Google has an ongoing relationship with No. 3 carrier Sprint Nextel (see Yahoo, AT&TLink on Mobile Search).

In February, Yahoo grabbed from Google a mobile search deal with German carrier Deutsche Telekom, replacing the search king as mobile search engine in 11 European markets (see Yahoo Scores Search Victory overGoogle). Google is the preferred search engine on the G1, the world’s first Android phone, which is being sold by T-Mobile USA.

Microsoft offered VerizonWireless between $550 million and $650 million over five years as guaranteed search income, but Google has offered only half of that, according to the Journal.

Microsoft is also negotiating a separate deal for VerizonWireless to install Windows Mobile, Microsoft’s mobile operating system, on more Verizon handsets.

The deals promise the companies premium real estate as the carriers’ “on-deck” search engines. In return the carriers get the benefit of attractive search algorithms designed to optimize ad revenues.

“Initially the carriers steered clear of the brand name search engines, choosing smaller search players instead. But now they have decided that the optimal strategy is to partner with the big online search providers,” said Fred Boxa, principal with IBB Consulting.

Subscribers are free to use the preferred on-deck search engine or they can use other search engines on the mobile web, but the likelihood that the user will choose the on-deck engine is good.

“It is about 50-50 whether the subscriber uses the on-deck engine or some other engine and that is because of ease-of-use and brand awareness,” said Paran Johar, chief marketing officer of JumpTap, a Cambridge,Massachusetts, mobile search advertising company.

At stake for the search engines and the carriers is a piece of the projected $221 million in total worldwide mobile search ad revenue. That total is expected to grow to $2.3 billion by 2011, according to eMarketer and eventually surpass online ad revenues, according to other analysts.

Yahoo leads on carrier partnerships with more than 60 deals, followed by Google with more than 40.