According to Reuters, Microsoft has offered to pay $1 Billion to Yahoo for its search business, a move that would have given the Internet giant an additional $1 Billion extra in annual revenue. Instead, the long-time search engine and email provider has opted to parter up with Google in a relationship that is going to permanently change Yahoo.

Instead of taking full acquisition in Yahoo, as Microsoft had tried before, the company was interested in replacing Yahoo’s Panama advertising system with its own. The Panama system is unique in that it changes advertisements shown during user searches with those that pay the most and are most likely to be clicked on.

Microsoft also offered to take 16 percent of Yahoo with a $8 Billion price tag. This would have valued the stock at $35 dollars a share. Talks between the two companies however fizzled, and a new deal was struck with Google, which will allow the Mountain View company to place their advertising on Yahoo.

With the situation at Yahoo looking a bit dismal due to the freefalling of stocks that has been ongoing since October (Yahoo’s share price went from $33.63 to $19.18), cofounder and chief executive Jerry Yang has been under pressure to raise the company’s stock value and generate more ad revenue.

Yahoo’s decision to join hands with Google could end up being a windfall, however. With the additional help from Google, Yahoo could possibly benefit from the search engine giant’s success in technology and online advertising. Only time will tell if the decision to feign off Microsoft was a wise one.