In dropping the lawsuits, the companies agreed to license their patents to each other. They are also agreeing to an advertising alliance that expands their existing partnership. Friday's settlement involves no exchange of money.
Now that the antagonism is dissolving into an accord that could benefit both companies, the hundreds of millions of Web surfers who use both Yahoo and Facebook should find even more common ground on the two services.
The advertising alliance could help Yahoo recover some of the revenue that it has been losing as marketers shift more of their spending to a larger and more engaged audience on Facebook's online social network. Facebook, in turn, gains the opportunity to show the ads tailored to fit the individual interests of its 900 million users in other heavily trafficked areas besides its own website.
The truce ends a conflict provoked by Yahoo's short-lived CEO, Scott Thompson, who was dumped from the job two months ago after misinformation on his official biography raised questions about his integrity.