Yahoo strikes $800-million ad deal with Google, ends talks with Microsoft

13 June 2008

Mumbai: Yahoo Inc has finally ended merger talks with Microsoft Inc and reached a non-exclusive ad search deal with internet rival Google Inc.

The Microsoft deal failed because, Yahoo said, it did not accept the proposal to buy only its search business.

Yahoo said it would instead let Google sell search ads on its site, dealing a big blow to Microsoft's plan to establish a strong footing in the online advertising market.

Under the agreement, Yahoo will run ads supplied by Google alongside its own search results and on some of its websites in the US and Canada, Yahoo said in a statement, adding the deal would add as much as $800 million in its annual revenue.

Yahoo expects the deal to generate an additional $250 million to $450 million operating income in the first year itself.

The deal, initially for four years, can be extended up to 10 years under mutual consent.