Google is walking away from its search-advertising deal with Yahoo.

The pact always seemed doubtful. How could regulators approve a deal that would have involved 90 percent of the market? And the compromises that were reportedly being offered undercut the incentives for doing the deal in the first place.

On the official Google blog, David Drummond, the company's chief legal officer, declared that enough was enough: "After four months of review, including discussions of various possible changes to the agreement, it's clear that government regulators and some advertisers continue to have concerns about the agreement. Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners. That wouldn't have been in the long-term interests of Google or our users, so we have decided to end the agreement."

Henry Blodget on Silicon Alley Insider says: "Yahoo's last little bit of leverage in a potential search deal with Microsoft just evaporated."

What is Yahoo's Plan C?