Yahoo and eBay Form Partnership to Compete with Google

Strategic Insights -

The partnership between Yahoo and eBay aims to strengthen their presence against Google, the leading search engine, and Microsoft, the largest software company. The alliance covers online advertising, online payments, and other areas, with Yahoo and eBay sharing revenue and resources. The deal comes at a crucial time for both companies, with eBay seeking to boost its slowing sales growth and Yahoo trying to recover lost revenue from its contract with Microsoft.

Key Takeaways:

  • The partnership between Yahoo and eBay is designed to better position them against Google, with Yahoo and eBay sharing revenue and resources.
  • Yahoo will be the exclusive provider of graphical ads on eBay's U.S. Web site, while also serving paid search ads on some eBay pages.
  • The companies will split revenue generated from ads placed on eBay sites, with eBay potentially gaining revenue through Yahoo's exclusive online payment service, PayPal.
  • The partnership is expected to have a material impact on revenue and the bottom line, but not until some time in 2007, as stated by Yahoo and eBay.
  • Analysts suggest that eBay's Skype Internet phone service will help boost click-to-call ad services, with Google planning a similar service.
  • EBay shares rose over 12%, while Yahoo's shares more than 3.5%, with Google rising a fraction.

Statistics:

  • EBay's shares rose over 12% in response to the partnership announcement.
  • Yahoo's shares rose more than 3.5%.
  • Google's shares rose a fraction.
  • The partnership is expected to have a material impact on revenue and the bottom line not until some time in 2007.
  • EBay could gain up to $100 million in revenue per year through its contract with Yahoo, replacing lost revenue from its contract with Microsoft.
  • The added ad revenue from the Yahoo pact could prop up eBay's slowing sales growth.

Sources:

  • Scott Kessler, Standard & Poor's analyst
  • Martin Pyykkonen, Hoefer & Arnett analyst
  • David Garrity, Dinosaur Securities analyst
  • Catherine England, eBay spokeswoman
  • Greg Sterling, Sterling Market Intelligence analyst
  • Yahoo and eBay joint statement