Google lets advertisers bid on keywords and charges a fee per click. The company favours relevant advertising by positioning ads that receive the most clicks at the top of the search results page.
This ensures that consumers are presented with relevant ads, and maximises Google's revenues.
Yahoo's new system is expected to allow for similar granular targeting and should help the search provider increase its revenues.
The acquisition allowed the firm to increase its advertising revenue, but Yahoo's failure to further develop the system and integrate it with other systems over time caused it to fall behind Google in the online advertising market.