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In the network of grand alliances taking shape on the internet in recent months, the deal between Google and eBay announced on Monday has a special place.
The leading internet search and auction companies have seemed to be on a collision course of late, triggered by Google’s decision to build a platform that could support a range of e-commerce and eBay’s rush to diversify from its maturing core market.
Google “is building infrastructure that looks like a marketplace, for itself and its partners”, said Joe Wilcox, an analyst at Jupiter Research.
For now, though, it seems that these and other US internet giants see more benefit in co-operating with each other than all-out war.
Like other recent landmark deals involving Google and MySpace, Yahoo and eBay, and Google and AOL, this is an acknowledgement that long-term strategic planning should not get in the way of short-term commercial reality.
The potential mass-market appeal for services such as Google Base or Google Checkout – the listings and payments services that could one day rival those of eBay – lies in the future. Current behaviour still revolves around the established online leaders.
Opening up these companies’ communities of internet users to each other, particularly using the more open technologies being deployed under the general banner of “Web 2.0”, brings immediate benefits to both sides, Eric Schmidt, chief executive of Google, said in an interview with the FT.
“Ebay and Google both benefit from the adoption of Web 2.0, or Web 3.0,” he said. “The more people we have using these services, the stronger the marketplaces and the stronger the communities.”
Brushing aside the potential competition between the companies, Meg Whitman, CEO of eBay, added that the alliance drew on the companies’ “complementary strengths – Google’s in search and advertising, ours in e-commerce and online communications”.
Mr Schmidt added: “I don’t think there’s that much overlap [between the companies’ services] at all.”
While these are the sort of sentiments often mouthed by chief executives at such times, Google and eBay’s apparent desire to extend their relationship even further in future suggests each sees significant benefits to working with the other.
Even in payments – an area where the two have seemed to be on a collision course – it seems they are likely to find an accommodation, with Google offering PayPal as an alternative payment vehicle on its sites in much the way that Yahoo has already agreed to do.
“I expect we will do a PayPal integration at some point,” Mr Schmidt said.
Coming in the wake of other big internet partnerships, meanwhile, the partnership of convenience between Google and eBay seems to leave open two big questions about future co-operation – and competition – between the dominant US online companies. One is whether the alliances, all of which cover a number of years (though precise details have not been disclosed), leaves a more stable landscape online, reducing the likelihood of more direct competition or mergers.
As the nature of online behaviour changes, there is no guarantee that today’s leading internet companies will be in a position to dominate the next phase of the industry’s development, even if they have consolidated their power, said Jennifer Simpson, an analyst at Yankee Group.
“There’s a lot of building going on outside the spheres of these companies,” she said.
User-generated content is changing the nature of online behaviour. Google’s deal with MySpace may suggest that the existing powers can find their accommodation with the new online communities as they emerge, but changing behaviour still points to greater instability.
The other big question concerns Microsoft, which has been shut out from the dominant online advertising partnerships. “It’s building for the long term – but will it lose too much in the short term?” asked Mr Wilcox. “There’s definitely a risk of that.”
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