It's official, Google has ended its ad deal with Yahoo. I'm sure this will do wonders for Yahoo's already tanking stock. Ouch!

In June we announced an advertising agreement with Yahoo! that gave Yahoo! the option of using Google to provide ads on its websites (and its publisher partners' sites) in the U.S. and Canada. At the same time, both companies agreed to delay implementation of the agreement to give regulators the chance to review it. While this wasn't legally necessary, we thought it was the right thing to do because Google and Yahoo! have been successful in online advertising and we realized that any cooperation between us would attract attention.

We feel that the agreement would have been good for publishers, advertisers, and users - as well, of course, for Yahoo! and Google. Why? Because it would have allowed Yahoo! (and its existing publisher partners) to show more relevant ads for queries that currently generate few or no advertisements. Better ads are more useful for users, more efficient for advertisers, and more valuable for publishers.

However, 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. 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.

Speaking of Microsoft, Google's arch-nemesis has reportedly "spent a lot of time and money trying to keep Google and Yahoo from coming together." The AP says the folks in Redmond tried to persuade regulators that the deal would hurt competition in the ad market, and they urged other advertisers to file formal complaints. With Google now out of the picture, Yahoo may have no choice but to come crawling back to Steve Ballmer�and agree to a buyout for less than the $33-per-share he originally offered...