Yahoo has announced a major shake up in its corporate structure and policy as the company fails to keep up with Google in the online advertising market. 

Chief executive Terry Semel said in a statement that the struggling web portal, which has seen a stock price slump of nearly 33 per cent this year, will be rearranging the way the entire company is run.

"The internet is continuing to grow and evolve at a rapid pace, and we are reshaping Yahoo to be a leader in this transformation," said Semel.

Beginning next year, Yahoo will be divided into three separate operating groups, each reporting to Semel.

The new divisions include an Audience Group which will focus on "building the largest and most valuable audiences and relationships on and off the Yahoo network".

An Advertiser and Publisher Group will focus on managing Yahoo's advertising content, while a Technology Group will be create the technical framework for new features and services.

Chief operating officer Dan Rosensweig and media group head Lloyd Braun will be leaving the company as part of the restructuring. Yahoo did not disclose whether any other employees will be laid off.

Forrester Research analyst Charlene Li praised the reorganisation on her blog, calling it a "bold, tough move" . 

The most intriguing of the three new divisions, according to Li, will be the Audience Group. "Of all the groups, I think this is the one that will make or break Yahoo's strategy," she wrote.

"In the end, the race is not to be the best search engine technology-wise, nor to have the most advertisers. It's about being relevant to your audience, no matter where they go or what they do."

Rumblings of an impending shake up at Yahoo began nearly three weeks ago, when The Wall Street Journal obtained a memo authored by Yahoo executive Brad Garlinghouse.

Garlinghouse argued in the memo that the company was spreading its forces too thin, likening Yahoo's business model to peanut butter spread thinly on a slice of bread.

He recommended that the company should restructure and cut up to 20 per cent of its workforce. 

In a posting to Yahoo's Yodel Anecdotal blog, Semel claimed that the restructuring had nothing to do with the Garlinghouse memo. 

"We have been orchestrating this plan for a number of months as we envisioned the next phase of growth for the internet," he said.

Semel's own conclusion, however, greatly reflects the thoughts expressed by Garlinghouse, which called for stricter management and a clearer business focus.

"We need a revitalised structure to heighten accountability and streamline decision-making while allowing us to better focus on serving our key customers, " wrote Semel.