Google has terminated a proposed search advertising deal with Yahoo, following months of scrutiny from the Justice Department and concerns from marketers about shrinking competition.

Under the agreement, ads served by Google would have accompanied Yahoo search results, netting Yahoo approximately $800 million in additional revenue.

Google had high hopes for the deal, but walked away after it became clear that a drawn-out legal proceeding was the only option ahead. Chief legal officer David Drummond cited concerns from both the DOJ and the marketing industry as reasons for ending the deal.

"Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners," Drummond wrote on the Google blog.

Yahoo issued a statement saying it was "disappointed that Google has elected to withdraw from the agreement rather than defend it in court." Yahoo had worked desperately to revise the search agreement after the DOJ indicated it would likely block it.

The DOJ felt the deal would limit competition, and Yahoo's revised deal did not eliminate those concerns, according to a report from The New York Times.

The dissolution of the partnership was hailed as a positive by advertisers.

“At a time when online advertising is growing as a vibrant, accountable medium for marketers, we need to encourage competition, innovation and productivity, and not concentrate market power, limit choices and potentially raise prices for search advertising,” said Robert Liodice, president of the Association of National Advertisers.

The failed Google partnership now leaves Yahoo sputtering and searching for a plan. The portal's stock prices have been in freefall, and Yahoo appears to have two main options for survival: a potential merger with the also-struggling AOL, or revisiting buyout discussions with Microsoft.