August 28, 2006

According to some reports, eBay says it will make a deal with Google to sell advertising that would appear on eBay pages shown to users outside of the U.S.

The transaction is important not only because Google and eBay are increasingly in direct competition but also because eBay signed a similar partnership three months ago with Yahoo that included ads on some of its domestic pages.

Such a partnership was seen as a way to counter the growing power of Google.

The Mountain View company is the leader in selling text advertisements on the Internet. In this business, it dwarfs Yahoo, especially in Europe. So as eBay looks to build its international advertising revenue, Google was in a position to offer a better deal than Yahoo.

“Google is very strong in every country outside of the United States,” said Meg Whitman, eBay’s chief executive, in an interview Sunday night. “We felt this arrangement of assets made sense.”

But the alliance is a striking one from a competitive standpoint. Investors have worried that eBay’s growth could slow because buyers can increasingly use search engines like Google to find obscure products.

And Google has been moving into each of eBay’s main businesses: Google Base lists products for sale; Google Checkout competes in some ways with eBay’s PayPal; and Google Talk is an alternative to eBay’s Skype online phone service.

As part of their deal, eBay and Google will build a “click to call” advertising system that will use both Skype and the much-smaller Google Talk. Ads on Google and products listed on eBay will have a click-to-call link that will allow users to have a conversation with the advertiser or product seller.

The companies expect that merchants will pay a fee — which Google and eBay will split — for each call they receive; this aspect of the deal involves both the United States and other countries.

“This is all about getting the customer to buy quicker,” said Eric E. Schmidt, Google’s chief executive.

eBay had said it would explore a click-to-call system with Yahoo, but Ms. Whitman said that such a deal made more sense with Google, which has a much larger share of the worldwide search market.

Source: NY Times