• by Tameka Kee , June 26, 2007

In a decision most industry accounts deemed as inevitable, eBay has resumed advertising with Google in the U.S. "We are now slowly turning AdWords back on, in a much more limited way than before," an eBay spokesperson confirmed in a statement.

Many called eBay's move to pull AdWords a calculated, full-scale reaction to Google's plans to host a "protest party" for disgruntled eBay merchants at the same time and place as the eBay Live annual user celebration.

But according to eBay executives, the withdrawal was part of an ongoing experiment to gauge the most effective means of driving site traffic--and plans were afoot to reinstate the ads all along.

eBay's renewal of advertising with Google seems in line with comments made by Matt Ackley, vice president of Internet marketing, during eBay Live: "We usually let these things run the length of a normal auction cycle," or about seven to ten days.

While the media industry speculated about which Web giant would suffer most from the move--eBay from decreased traffic, or Google from loss of revenue--Wall Street pegged eBay as the company with slightly more to lose.

But Hitwise numbers show an average increase in eBay traffic during the ten days "sans Google" (June 11-21)--1.8% of all U.S. visits, up from 1.7% the preceding ten days.

Although comScore reports that on average, Google drives 6% of eBay's overall traffic, it seems eBay fully leveraged the option to divert more of its budget to search competitors like Yahoo, Microsoft's Live Search and IAC's Ask.

On the other hand, analysts such as Merrill Lynch's Justin Post have estimated Google's ad income from eBay to be about $170 million annually. At roughly 1 percent of the search giant's total gross revenues, eBay's business is significant, but not essential for Google's financial success.

What's at stake is Google's reputation as the most viable, powerful advertising partner on the Web--a cultural currency that can influence how global brands and small businesses alike make future choices.

In the words of an eBay spokesperson: "We found that we were not as dependent on Google AdWords as some may have thought. By re-allocating our marketing dollars to our other partners, such as Yahoo, AOL and MSN, we were able to increase traffic and find efficiencies that will enable us to drive more value to our sellers and partners going forward."