Yahoo and Google are substantially narrowing their proposed advertising agreement to meet the antitrust concerns of the US Justice Department, according to reports Tuesday by the Wall Street Journal and the New York Times.

The new proposal shortens the term of the deal from 10 years to two years, and places a limit on the revenue that Yahoo can generate from Google to 25 per cent of Yahoo's search revenue, the reports said.

Under the deal, Google would place ads next to some Web search results on Yahoo and split the revenue with the ailing web giant. Yahoo had estimated that the original deal would boost its operating cash flow by 250 million dollars, to 450 million dollars. The new terms could significantly cut that figure.

Others wondered why is Google insisting on this deal, as the Internet giant isn’t in the position to depend on such deals. Experts say that this is very important for Google because the deal can alienate Microsoft. Also, if the deal between Google and Yahoo doesn’t work out, there is a possibility of Yahoo teaming up with Microsoft, meaning bad news for Google.

However, there is no telling how the whole thing will end, a partnership between Google and Yahoo will definitely cause some major shockwaves on the whole Internet market.

The two companies control more than 80 per cent of online advertising. A coalition of advertisers and competitors oppose the tie-up, saying it will reduce competition and lead to higher prices.