Yahoo and Google renew ad partnership

Google appears to have won the battle for Yahoo

Yahoo is expected to gain an estimated $800m (£411m) in annual revenue through renewed advertising co-operation with Google.

A new deal will see the Mountain View search firm supply a proportion of the ads appearing on Yahoo's search engine and community sites. A similar arrangement was road tested by the companies in April.

"We believe that the convergence of search and display is the next major development in the evolution of the rapidly changing online advertising industry," said Yahoo chief executive Jerry Yang, in a written statement.

"Our strategies are specifically designed to capitalise on this convergence and this agreement helps us move them forward in a significant way."

Yesterday Yahoo also revealed that renewed discussions of a possible merger with Microsoft had ended unsuccessfully. The search firm's share value fell 10 per cent following the news, while Microsoft's stock rose by four points.

The collapse of the Microsoft deal may affect the actions of Yahoo shareholder Carl Icahn, who had planned to overthrow the board of directors at the company's annual meeting. The delayed event is due to take place on 1 August.