San Francisco, June 13 : Google has agreed to deliver ads next to some of Yahoo’s search results and on some of its websites in the United States and Canada according to an agreement signed by both the companies.

The deal is aimed at giving a lift to Yahoo’s finances, and the company said it would generate an additional 250 million dollars to 450 million dollars in operating cash flow in the first year.

The agreement will also strengthen Google’s dominance over the lucrative search advertising market.

It was signed after Yahoo rejected a proposal by Microsoft to acquire both Yahoo’s search business and a minority stake in the company.

“Clearly it is time to move on,” Jerry Yang, Yahoo’s Chief Executive, said in a conference call.

“This agreement with Google would help us to do so,” Yang added, saying that the deal would allow Yahoo to continue to compete in its two main lines of business, search and display advertising.

In a statement, Microsoft said that its offer to buy Yahoo’s search business was still valid.

Under the agreement with Google, Yahoo will choose search terms for which Google will offer ads. Yahoo will determine the number and placement of ads sold by Google and would mix them with some ads.

“We think of it as backfilling with Google monetization, rather than outsourcing,” the New York Times quoted Yang, as saying.

The four-year agreement, which can be renewed for two terms of three years, will allow Yahoo to continue to invest in improving its own search and search advertising business, Yahoo said.

A Google co-founder, Sergey Brin, said that the company was happy to have Yahoo as an advertising partner but refused to discuss Google’s expected financial gain from the deal.

On Sunday, a group of Microsoft executives discussed the proposal with Yahoo board members during a two-hour face-to-face meeting at Mineta San Jose International Airport. The meeting included Steven A. Ballmer, Microsoft’s chief executive, and other top Microsoft officials, as well as Yang; Yahoo’s Chairman, Roy Bostock; and other Yahoo directors.

At the meeting, Microsoft executives repeated that they would not consider buying all of Yahoo, in part because any merger deal signed now would be subject to a review by regulators.

Yahoo agreed to consider the proposal at a full board meeting on Tuesday. On Thursday, Yahoo said that it had concluded that selling its search business alone to Microsoft would not be in its best interests over the long term and that all talks with Microsoft were over. (ANI)