Google, the US tech giant, has agreed to sell a majority stake in a global ad network it owns for $5bn to Facebook, marking the first major deal of its kind.
The deal, expected to close in the second quarter of 2017, is the first of its type and the largest for Google, which owns ads on the social network.
The deal also means that Google is likely to continue to dominate the advertising market in the United States.
Google’s global operations are dominated by the ad platform Google Search, which has more than 1bn users and which includes its own search engine and ad network.
However, the company has struggled to gain traction with the mobile market, with ad revenue falling by almost 30 per cent in the past year.
Google and Facebook have been trying to work together since 2014, when Facebook bought Instagram for $1bn.
They had previously agreed to work more closely on ads in their respective services, but in a sign of the growing tension between the two companies, Facebook last month announced it was scrapping the plans to buy Instagram for an undisclosed sum.
Google, which is based in Mountain View, California, will continue to be the dominant player in the ad market, accounting for more than a quarter of the global market for online advertising.
But the company is looking to scale its ad business and expand its reach into more of the world’s markets.
Google will pay $1.6bn for a 49 per cent stake in its advertising arm, which includes the ads that run on YouTube, Google’s YouTube TV, YouTube Maps and Google+ ads.
The other two-thirds stake will be held by its rival Facebook, which will pay about $3.5bn for its advertising business.
Google already owns the YouTube ad network, but Facebook has long dominated the video platform and is currently the largest advertiser in YouTube’s US audience.
Facebook has also been trying in recent years to gain a foothold in the digital space, launching the $1 billion buyout of news and information site BuzzFeed last year and also purchasing news site The Huffington Post last year.
It is not clear what, if any, effect the sale of Google’s ads would have on Facebook’s video advertising business, which relies heavily on YouTube and the ad network Google.
The sale of Facebook’s ad network could potentially give Facebook a bigger foothold in online video advertising than Google’s own ad network does.
But Google said the deal was an important step in its efforts to grow its business and broaden its reach in the online space.
The move will also open up the company to more competition from other online ad platforms such as Facebook and Microsoft.
The sale comes at a time of increased competition in the advertising space.
Facebook is now looking to compete with online rivals such as Microsoft, which announced last week it was cutting its ad spend by more than half in 2017 to $2.4bn.
Microsoft and YouTube are expected to launch new ad networks in 2018, including the $15bn Facebook-owned News Feed, which would make it the largest social network in the world.
Google is looking at other options for its ad space, including buying up rival companies such as Zoho and Google Ventures.