Microsoft and Google have found common ground in their long-running dispute over the YouTube app for Windows Phone 8, agreeing to work together on the creation of a new version intended to address the two companies’ needs.

According to a widely published statement, Google said it would work with Microsoft “to update the new YouTube for Windows Phone app to enable compliance with YouTube’s API terms of service, including enabling ads, in the coming week”.

It was also noted that Microsoft would replace its own YouTube app with an earlier – less contentious – version in the meantime.

Earlier this month, Google took action to prevent Microsoft from offering a YouTube app it had developed itself for Windows Phone, because it did not support the display of ads, removing an important monetisation path for content providers.

In addition, the app enabled customers to download content from the Google-owned service, overriding the content settings of the owners – which may have resulted from contractual requirements.

But this was not the first stage in the spat. Microsoft had previously hit out at Google for not providing access to YouTube metadata necessary to deliver an improved app for Windows Phone users, stating that the search giant had told staff “not to enable a first-class YouTube experience on Windows Phone”.