Google's recent launch of a product-listings service with an online payment system has eBay on red alert and seeking to defend itself through partnerships with Yahoo or Microsoft, the Wall Street Journal reported Friday.
EBay generates most of its revenue from listings and online payment fees it charges sellers who peddle their products on its site. For years, it has spent considerable amounts of money to advertise its business through Google's online ad network.
EBay spokesman Hani Durzy declined to comment on the story, but said eBay, as one of the world's biggest buyers of search-based ads, constantly talks to Microsoft, Google and Yahoo. "As the three major search engine companies, they are great channel partners to bring demand to our site. We're always looking to better leverage our relationship with them to improve our fundamental job of bringing buyers to our sellers."
According to the Journal, eBay last year began to fear that Google could become a significant threat, particularly after the introduction of Google Base in November. The Journal report cited anonymous sources who also say the discussions, while ongoing, are in preliminary stages and may fall through.
News of eBay's alarm highlights Google's increasing clout and power beyond its core business of search engine services and advertising. In the past two years, Google has transformed into a provider of Web portal services, including Webmail, blogging, photo sharing and instant messaging, encroaching on Yahoo's and Microsoft's territory, and now it's ruffling eBay's feathers with its e-commerce moves.
Google Base, in beta-test since November 2005, lets users post content to the search engine's index. Some postings are items that are for sale, so in February of this year Google added e-commerce transaction capabilities to Google Base so that buyers can purchase items from sellers using credit cards. More recently, for-sale items from Google Base have begun showing up on Google.com's general Web results, including real estate listings.
These moves have eBay executives feeling that by heavily using the Google ad network to market their services, eBay is feeding the business of a company that is morphing into a dangerous competitor, according to the Journal.
Starting in 2005's fourth quarter, eBay has been discussing with Yahoo and Microsoft the possibility of opening its marketplace's Web pages to ads from the Yahoo or Microsoft ad networks, something eBay currently doesn't do, and shifting ad money it currently spends on Google to Yahoo and Microsoft, according to the Journal.
Microsoft has offered to give eBay special access to its search results and to closely integrate eBay's PayPal online payment system with Microsoft software and MSN portal, according to the Journal. Yahoo has also proposed a tighter PayPal integration with its systems, and integrating eBay's Skype VOIP (voice over Internet Protocol) service with Yahoo's ads to let buyers and sellers communicate over the phone via a PC.
EBay is monitoring Google Base, but most for-sale items there are linked to external sites, eBay Durzy said. "If it ends up driving traffic to other e-commerce sites like eBay, that's another great channel for us." As for Google Base's online payment component, eBay, on its part, is focusing on growing PayPal, which as of March 31 has 105 million accounts, Durzy said.
After learning of eBay's competitive concerns, Google reacted and is now discussing ways with eBay to adjust their current dealings, considering similar arrangements as the ones on the table with Yahoo and Microsoft, according to the Journal.
Without commenting on this, a Google spokesman wrote via e-mail: "EBay is a valued partner and we look forward to a long successful relationship."
Representatives from Microsoft declined to comment and Yahoo didn't immediately respond to requests for comment.