Yahoo, the struggling internet giant, has acquired BlueLithium, the online advertising group, for $300 million (£149 million) in cash, in a renewed effort to close the yawning gap between it and the market leader Google.

BlueLithium specialises in the “behavioural targeting” of display – or banner – advertising, a process that tracks individual web users’ habits online in order to feed them the ads they are most likely to respond to. Its British-based advertising client brands include Vauxhall, the carmaker, Abbey, the bank, and Cancer Research, the charity.

Online display advertising is estimated to be growing at 30 per cent pace across Europe. “We are a leader in display advertising and are seeing a great secular trend,” Toby Coppel, the head of Yahoo’s European operations said.

Blue Lithium tracks online behaviour through “third party cookies” – small parcels of computer code that are installed on a user's computer by a website and can then track them across several sites. It also specialises in technology that processes that data.

Jerry Yang, the Yahoo chief executive, said: “This acquisition will extend our ability to deliver powerful data analytics, advanced targeting and innovative media buying strategies to our customers, who are increasingly looking for these insights.

“By leveraging BlueLithium’s complementary expertise and tools, we will be able to better address the needs of our performance-based display advertisers and enhance the value of our publishers’ inventory.”

Blue Lithium also claims to have the fastest-growing online ad network in the UK, which currently reaches about 82 per cent of the country’s online population. Yahoo said that a combination of its own online reach with BlueLithium’s will reach more than nine of ten UK web users.

According to comScore Media Metrix, BlueLithium is the fifth largest ad network in the US and second largest in the UK with 145 million unique visitors each month.

The acquisition is the first to be announced since Sue Decker, the Yahoo president, promised a sweeping reorganisation of the company last week.

It follows a spate of consolidation in the online ad sector, in which Yahoo recently bought Right Media, the online ad exchange, for nearly $700 million, Google bought DoubleClick, the largest broker of display – or banner advertising – for $3.1 billion and Microsoft snapped up aQuantive for $6 billion.

Yahoo has also sought to sharpen its performance by investing heavily in a new search-based advertising platform, dubbed Panama, and by forging partnerships with outside groups including eBay, the online auction house, Comcast, the cable group, and a host of newspaper sites, under which it supplies them with advertising.

The company is under intense pressure to improve its flagging performance, which led to the departure in June of Terry Semel, the former chief executive. He was replaced by Jerry Yang, the Yahoo co-founder.

Yahoo’s profit fell by nearly 7 per cent to $303 million during the first half of this year, while Google’s earnings soared 47 per cent to $1.9 billion.

Yahoo’s shares have fallen nearly 40 per cent since the end of 2005.

Founded in 2004, BlueLithium has offices in San Jose, London, Paris, New York, Los Angeles, Boston, San Francisco, Chicago, Boston, Atlanta and Belarus.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive