In its heyday, MySpace made Lily Allen a star and enticed 1 million people a week into cyberspace. But now it's fallen out with the music business.

When MySpace announced deep cutbacks last month Rupert Murdoch's aura of hi-tech visionary abruptly dimmed. No longer would the media patriarch, who bought the pioneering social networking site in 2006, be seen as a septuagenarian new media wizard, widely lauded and celebrated on the cover of Wired. Instead, Murdoch and News Corp have joined the long line of investors who bought smartly into the next big thing only to see it crumble almost as quickly.

)*Lily Allen is one of many artists that has benefited from MySpace's star-making power.

More than one-third of MySpace's employees at its headquarters on Wilshire Boulevard in Los Angeles and in offices around the world have been instructed to clear out their desks.

Yahoo chief Carol Bartz: relations with Microsoft have warmed since her arrival
Photograph: HO/AFP/Getty Images

Microsoft and Yahoo have reached an agreement on a search and advertising deal, with an announcement expected as soon as today, according to US media reports.

The deal, which follows Microsoft's unsuccessful bid to buy Yahoo's search business for $1bn (£610m) last year, is not thought to involve any upfront payment. Instead, as previous speculation had suggested, it will focus on a revenue-sharing deal between the two companies.