Google, Yahoo call off advertising deal

San Francisco, Nov 6 (DPA) Google has officially called off its proposed advertising alliance with Yahoo following anti-trust opposition from the US Justice Department, the companies said Wednesday.

The move was seen as a setback to both companies, but especially to the ailing Yahoo, which had hoped to book as much as $450 million per year in added operating income by running Google's more lucrative ads next to its own search results.

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'After four months of review, including discussions of various possible changes to the agreement, it's clear that government regulators and some advertisers continue to have concerns about the agreement,' David Drummond, Google's chief legal officer, wrote on the company's blog.

Noting that several major advertisers had objected to the deal, Drummond added: '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 had identified the alliance as a major strategy initiative, after it rejected a $47.5-billion takeover offer from Microsoft earlier this year. The company's stock has since plummeted from about $30 to $14, and Yahoo said Wednesday that it was disappointed by Google's decision.

'Yahoo continues to believe in the benefits of the agreement and is disappointed that Google has elected to withdraw from the agreement rather than defend it in court,' Yahoo said in a statement.