Yahoo will buy nearly 25 per cent of Taboola.com and become its largest shareholder in a deal allowing the online advertising company to exhibit paid content on the web portal's many sites.

The 30-year contract, marks a big bet by internet pioneer Yahoo on digital advertising at a time when industry giants from Alphabet-owned Google to Meta Platforms care struggling with an inflation-driven downturn in ad spending.

The Yahoo-Taboola partnership is estimated to generate US$1 billion in annual revenue, but the companies did not provide any other financial details. Yahoo will also get a seat on Taboola's board.

Yahoo, owned by private equity firm Apollo Global Management since a US$5 billion buyout last year, has over the years been overtaken by Google and Facebook, but it still has nearly 900 million monthly active users thanks to a collection of sites such as Yahoo Finance, Yahoo Sports and TechCrunch.

Taboola, whose shares rose 60 per cent on the news, pushes links to articles paid by advertisers - known as native advertising - on many websites such as CNBC and NBC News.

The deal will hand Taboola exclusive rights to sell native ads on Yahoo's sites.

The advertising company said it expects the agreement to add to its revenue, operating earnings and free cash flow. In its latest earnings, Taboola posted a drop in quarterly revenue and also lowered its annual forecast because of a weak ad market.

The deal, which has been approved by the companies' boards, is expected to close in the first quarter of 2023. Taboola plans to host a meeting on Dec 30 to seek shareholders' approval.

Taboola, which went public through an about US$2.6 billion blank-check merger in 2021, has lost 75 per cent of its market value this year, as of last close.