Web search leader Google Inc said it is buying Silicon Valley display advertising technology startup Teracent, which expands its competition with display leader Yahoo Inc.

Online advertising is divided into search -- usually text ads related to content on a Website -- and display, such as banner ads that are often used as branding tools by corporations.

Teracent's technology customizes graphic advertisements based on who is watching them, so that a retailer's closest store could become part of an ad, for example, or new products could be swapped into a company's standard ad with minimal effort. Ads can also be changed based on the time of day and a person's language, the company said.

Yahoo is the top display advertiser, with 14.5 percent market share in September, according to comScore. Google ranked sixth at just 2.2 percent, although the figures do not include display ads that the companies sell through ad networks or exchanges.

This is the latest moves by the giant Web search company, which purchased AdMob earlier this month and re-launched its advertising exchange built to include technology from display ad company DoubleClick.

Google Chief Executive Eric Schmidt said this summer that display advertising is likely to be the next billion dollar business at Google.

Google did not disclose the terms of the Teracent deal.

(Reporting by Ian Sherr, editing by Gerald E. McCormick)