Yahoo has announced it will no longer use Google's search technology, but develop its own as part of its strategy to challenge Google's market share, BBC reported Thursday.
Google, which has 80 percent of the market, says it continually upgrades its own systems.
"There's a new level of competition and we need to take it seriously," said Google co-founder Sergey Brin, who noted Microsoft is also investing heavily in search engine development.
"We have decided to put even more energy into our improvements and have turned up the notch on innovation a bit," he said.
Google, according to BBC, is also preparing for a stock market float this year, which could value the company at up to $15 billion and provide a huge injection of funds.
Yahoo is worth about $30 billion.
Yahoo Vice President Jeff Weiner says the company's plan is to "change the game in search".