Yahoo co-founder Jerry Yang has been appointed as the company's new chief executive. Yang previously held the title of 'Chief Yahoo'. 

Yang replaces Terry Semel, who was appointed in 2001. Semel, a former movie studio executive, helped the firm bounce back from the collapse of the internet bubble, only to lose the search crown to Google.

Semel will continue to work for the company as a non-executive chairman.

Although Yahoo still ranks as the world's most trafficked website, the firm has been battling a drop in market share and overall revenues.

Google, meanwhile, has demonstrated steady growth in revenues and search market share.

Market share data for April 2007 from comScore lists Google at 67 per cent, Yahoo at 18.8 per cent and Microsoft at 7.7 per cent. 

Google has consistently strengthened its grip on the search market in the past 12 months, while Yahoo and MSN have slipped.

"The past year has obviously not been an easy one for us," Yang said in a posting to a company blog. "But we have taken important steps to address the challenges, and we are starting to realise some of the benefits." 

Semel added in a press release: "This is the time for new executive leadership with different skills and strengths to step in and drive the company to its full potential. It is the right thing to do, and the right time is now."

Yahoo unveiled its Panama advertising management system in February, claiming that the technology would do a better job at matching advertisers with searchers and result in a subsequent revenue boost. 

The company also acquired Right Media, an online advertising network, in April which came only weeks after Google's $3.1bn DoubleClick purchase. 

Yahoo has yet to report earnings for a quarter during which Panama was fully functional.

Investors welcomed the executive reshuffle, and Yahoo stock jumped nearly five per cent after the announcement.

Yang co-created Yahoo as a directory of websites in April 1994 with David Filo. Similar to Google co-founders Larry Page and Sergey Brin, Yang and Filo were PhD students at Stanford University when they founded their company.