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Why is Ebay sleeping with the enemy? At first sight it looks strange for the e-commerce giant to sign up Google as its international advertising partner. Google is clearly a threat. As it flexes its online muscles, Google is starting to encroach on Ebay’s core e-commerce and payments businesses.
For that reason, it seemed logical that Ebay chose Yahoo as its US partner – forming a common front against the power of Google. Yahoo will place advertising on the Ebay site. Yahoo will also promote Ebay’s PayPal payments service and Skype telephone service.
But life on the web is not black and white. While a potential enemy, Google’s search engine is also a vital source of online traffic for Ebay. And for international advertising, Ebay simply needs Google. Google has a far higher market share of searches and a stronger international advertising network than Yahoo. Ebay should do much better financially by partnering with Google overseas.
Meanwhile, Ebay gets to hedge its bets in the fluid world of internet alliances. For example, it appears to be developing “click-to-call” services (where a customer who clicks on an ad is connected directly to the merchant) with both Yahoo and Google. Through an alliance, Ebay could also encourage Google to collaborate in other areas such as online payments.
With Google in the picture, the idea of Ebay and Yahoo merging to form a rival powerhouse looks more remote. But this does not mean big deals are impossible. One company largely excluded from the recent web of internet alliances is Microsoft. It is developing its own search advertising network. But if the software giant’s web strategy one day needs a real kick-start, it has the resources to go after the likes of Ebay or Yahoo.