Yahoo joins battle with Google after EU revamp

New-look website aims to increase its popularity and win users from giant rival

Yahoo has renewed its assault on Google by overhauling its European search engine, a move that executives are calling a "major milestone" in the group's development. Yahoo's shift to a more personalised home page, its biggest revamp in three years, comes amid talk of Yahoo going into partnership with Microsoft to take on Google.

Eden Zoller, an analyst at Ovum, said the redesign was "clearly an attempt to close the popularity gap" with its larger rival and that the site was popular with users. However, she warned: "This is positive but not enough to turn Yahoo's fortunes around."

The new look enables users to unite Yahoo's home page, containing news, mail, search and mobile services, with their favourite websites, social networks such as Facebook and Twitter and email accounts. It is gambling that the personalised touch will increase its advertising revenue. The company described its redesigned website as similar, in essence, to the applications tagged on to the Apple iPhone.

Rich Riley, the head of Yahoo Europe, said: "This is the most significant change in our evolution so far. It is no longer just a page, it is an application. One size fits all no longer works".

Yahoo had an ambitious plan to become the "centrepoint of people's lives online", he added.

The testing site went live yesterday and will launch fully in the autumn, accompanied by a marketing blitz. Yahoo said the primary objective was to further increase its audience in the EU. In March, Yahoo's European site had more web traffic than the US version for the first time. Mr Riley added: "This big launch in the region will only accelerate that momentum."

Yahoo was the fourth most popular website in the UK in May with 22.5 million hits, according to the data provider Comscore. Across Europe it was third biggest, with 121.6 million unique users over the same period and an 8 per cent market share.

However, Yahoo's site was used for only 4 per cent of internet searches in the UK in May, compared with Google's 79.3 per cent, ComScore said. In Europe, Yahoo's share of online search requests was even smaller – 1.5 per cent against Google's 81.4 per cent. Mr Riley insisted that internet searching was "a small part of what we do", adding: "Different consumers want different things. Some just want a search page. Others want it more customised."

As it seeks to make up ground on its bitter rival's iGoogle page, Yahoo has launched its Buzz site, which provides a newsfeed service to rival sites such as Digg, as well as an upgraded Yahoo Mail in the UK.

Ovum's Ms Zoller said: "The anticipated revamp has been generally well received but overshadowed by Yahoo's lacklustre second-quarter results and reports that its on-off talks with Microsoft are back on the table."

Yahoo's second-quarter profits this year were 8 per cent higher than in 2008 but its revenues fell by $200m, hit by the downturn slump in advertising. "This makes it even tougher than normal to grow revenues and market share, particularly when the main competition in the shape of Google is getting stronger," Ms Zoller added.

It was reported last week that Yahoo could be looking to sign an agreement with Microsoft, despite talks over a $45bn deal collapsing last year.

Ms Zoller said a partnership would be more effective than a merger, which would "create more problems than it would solve".