Yahoo! has just agreed a deal with search engine giant Google that will incorporate Yahoo! making use of the latter’s advertising technology. Google ads will now appear alongside select Yahoo! search results after the agreement, applicable in the US and Canada.

The announcement was made after Yahoo! stated it had failed in persuading Microsoft to renew its takeover bid. Recent talks concluded after the internet company flatly rejected a proposal from Microsoft to buy only its online search business.

Yahoo! stated the agreement signed with Google could well be worth up to £410m ($800m) in additional revenue yearly.

Google chairman and chief executive Eric Schmidt stated:

This commercial agreement gives Yahoo! the opportunity for delivering more relevant ads to users and also provide advertisers as well as publishers with better advertising technology.

Google informed the deal did not require any regulatory approval, but would delay its implementation by three and a half months for the US Department of Justice to review it.