Yahoo! and Google have announced that they will undertake a three-week experiment sharing advertising space.

The deal, announced on Wednesday, will enable Google to show ads tied to about three per cent of internet searches made in the US through Yahoo!'s search engine, which is the second largest after Google.

Yahoo! will still use its own technology to place ads next to the rest of the results appearing on its search results.

Microsoft has criticised the trial arrangement with Brad Smith, Microsoft's general counsel, saying: "Any definitive agreement between Yahoo and Google would consolidate over 90% of the search advertising market in Google's hands.

"This would make the market far less competitive", Mr Smith added.

The New York Times has reported that Rupert Murdoch's News Corporation is in talks with Microsoft about joining in its bid for Yahoo!.

Microsoft made a $44.6 billion bid for the internet search company in February. Earlier this month Yahoo! rejected the bid saying it undervalues them.

In an open letter to Microsoft chief executive Steve Ballmer, Yahoo said that they would only be open to a better deal.