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Yahoo, eBay Team in Battle With Google

Posted on: Friday, 26 May 2006, 06:00 CDT

By Jefferson Graham

LOS ANGELES -- In a bid to challenge Google's growing domination of the Internet, auctioneer eBay joined forces with Google rival Yahoo on Thursday. The alliance brings text-based advertising to eBay from Yahoo and eBay's PayPal payment program to Yahoo.

"This is a real boost for Yahoo at a time when they really needed it," says Allen Weiner, an analyst at researcher Gartner. "Yahoo is in a battle to the death with Google and Microsoft, and getting eBay's base into the Yahoo network will make people look at Yahoo's ad platform as a real plus."

Weiner says PayPal represents 20% of eBay's revenue. Expanding PayPal to the Yahoo network "is an interesting way for Yahoo to offer digital content for sale, like movies and TV shows, and offer its customers a really easy way to pay for it."

Yahoo is the most visited website, with more than 100 million monthly visitors. But it has been losing market share in online searches to Google, which dominates the hot search advertising business -- those little text ads that appear near search results. According to measurement firm ComScore Media Metrix, Google's search share rose 6.6% in April over the same time a year ago, while Yahoo's fell 2.7%.

EBay, the Internet's fifth-most-visited site, according to ComScore, is also the Internet's largest purchaser of search ads, says John Battelle, who runs the Searchblog website. "It was inevitable that Yahoo and eBay would do this deal, because eBay needed to counterbalance its dependence on Google for traffic," he says.

John Donahoe, president of eBay's marketplace division, says eBay supports its network of sellers by advertising their wares elsewhere on the Web with a heavy use of search-based "keyword" advertising. In the past year, eBay's purchases of keywords for use in search queries has gone from 1 million to 15 million keywords, he says.

Google late last year introduced a classified-ad service, Google Base, where individuals can buy and sell goods. Google has consistently denied that it was going after eBay's business.

Yahoo and eBay executives insisted Thursday that competitive pressures with Google had nothing to do with their deal. "We're not focused on what others do but what we think is best for our community," said Yahoo Chief Operating Officer Dan Rosensweig.

Yahoo until recently provided search advertising for Microsoft's MSN. This year, Microsoft introduced its own ad platform.

Donahoe says no money is changing hands in the deal with eBay. Instead, both companies will share revenue, splitting proceeds from advertising and PayPal fees.

Martin Pyykkonen, an analyst at securities firm Hoefer & Arnett, says he doesn't expect the deal to generate a lot of cash immediately for either company.

The alliance is more "tactical," he says. "Yahoo and eBay have a common enemy, Google, and they're both protecting themselves."

(c) Copyright 2005 USA TODAY, a division of Gannett Co. Inc.

Source: USA TODAY

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