After three months of courtship, software giant Microsoft has abandoned its attempt to buy Yahoo. It seems that the two companies couldn't agree on a sale price. Microsoft chief executive Steve Ballmer sent his Yahoo counterpart Jerry Yang a Dear John letter to tell him that the relationship was officially over.

According to Ballmer, Microsoft had offered $47.5bn for Yahoo's services but Jerry Yang & Co. wouldn't accept anything less than $53bn. The software giant was hoping to seal the deal in order to challenge Google's dominance of the internet advertising market which will be worth a staggering $80bn by 2010.

In his letter to Jerry Yang, Mr Ballmer also made it clear that Microsoft will not resort to its original plan B: an attempted hostile takeover of Yahoo. Instead Microsoft will look at alternative strategies to challenge Google's internet advertising hegemony.