Google has pulled the plug on a proposed search-ad partnership with Yahoo.
The deal would have given Yahoo major new revenue, but raised antitrust concerns.
"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," wrote David Drummond, Google's chief legal officer, in a blog post on Wednesday.
"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," Drummond wrote.
Yahoo expressed disappointment with the 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," the company said in a statement.
"Google notified Yahoo of its refusal to move forward with implementation of the agreement following indication from the Department of Justice that it would seek to block it, despite Yahoo's proposed revisions to address the Department of Justice's concerns," the company said.
The deal's demise is a new blow to the struggling Internet pioneer, which stock plunged to a closing price on Tuesday of US$13.35, even though Microsoft had offered as much as US$33 per share just months ago in an acquisition attempt.
When Yahoo and Google announced the search-ad deal in June, Yahoo said the agreement would generate US$800 million in revenue, and US$250 million to US$450 million in incremental operating cash flow in the first 12 months of operation.
Under the deal, Yahoo would have placed Google ads on some Yahoo search results, and the companies would have shared resulting revenue. The deal would have let Yahoo show ads on pages where its own technology, Panama, was not able to provide results, the company said.
This article was first published as a blog on CNET News.com.
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