Yahoo! courted the company last year but was rebuffed when GeoCities went for an Initial Public Offering. Its target has a market value of $2.3bn compared to Yahoo!'s $38bn.

Of more value to Yahoo! will be GeoCities' reach, which would encourage more advertisers. A third of all active Web users visited the site in December, according to Media Metrix statistics.

Adding this to Yahoo!'s 48.2% reach would put it back on top of the Website rankings. It currently lies behind AOL (54.5%) and Microsoft (48.4%).

"GeoCities has built the Web's most popular and widely used community," said Yahoo! chairman Tim Koogle. "Through this acquisition, we are accelerating our global leadership position by combining two of the Web's strongest brands and most heavily used services into one powerful offering."

On the Nasdaq stockmarket, the deal triggered a strong rise in share prices of most Internet stocks. Yahoo! has said it will pay for the deal with its own shares.

Yahoo! launched its own communities concept called Yahoo! Clubs last August but it is small in comparison to GeoCities, with more than three million members being given their own home pages.

The Yahoo! Web directory has developed into a portal site providing a range of services. It is in competition with sites such as Excite, bought by @Home this month, and AltaVista, whose owner Compaq announced plans to partially spin off the service this week.