Google, Yahoo deal collapses

Google has abandoned its advertising tie-up with Yahoo after advertisers and government regulators became concerned.

The collapse of the deal, which would have seen Google provide adverts for Yahoo sites, stirred up controversy as authorities believed it would give too much power to Google.

Without the agreement, Yahoo faces an uncertain future as its board had rejected Microsoft's $47.5 billion takeover offer on the basis the company could get better value through a partnership with Google.

However, the objections to the agreement proved to be too strong for Google.

The internet search engine giant said: "Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners. That wouldn't have been in the long-term interests of Google or our users, so we have decided to end the agreement."

Yahoo said it is "disappointed that Google has elected to withdraw from the agreement rather than defend it in court".

However, Yahoo added the deal was only "incremental" to its overall strategy and does not change its commitment to growth in search.

The move has led some to suggest Microsoft may be tempted back to the table – at a price far below the $33 a share it offered last time.