Google pulls out of $800m Yahoo deal

Google has pulled out of its proposed advertising deal with Yahoo. The controversial $800m agreement would have seen Google adverts appear on Yahoo's search engine but was being looked at by the US Department of Justice over antitrust claims.

Yahoo chief executive Jerry Yang expressed his disappointment with Google's decision yesterday at the Web 2.0 Summit in San Francisco: "It was disappointing to us that they didn't want to defend this deal. We were going through a process with the Department of Justice to get them to understand how this was a good deal, Google clearly felt they didn't want to stay in."

Google explained the surprise decision in a statement released through the company's legal officer David Drummond which claims that the web giant didn't want to be drawn into a potential protracted legal battle.

"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," the statement says. "Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners."

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