Yahoo, eBay Confirm Partnership

Challenging the threat posed by Google, Yahoo and eBay on Thursday confirmed rumors of a search advertising partnership to be implemented over the next year. eBay will allow Yahoo to extend its graphical ads to the online auctioneer's roughly 75 million users--and, in turn, Yahoo will bolster eBay's search software to fend off Google.

"This partnership with eBay provides us with a great opportunity to further extend our sponsored search and graphical advertising reach to one of the largest and most active communities on the Web," Yahoo chairman and CEO Terry Semel said in a statement.

Per the multi-year deal, eBay's PayPal payment service will serve as Yahoo's exclusive online payment service. Yahoo will become the exclusive third-party provider of all graphical ads throughout eBay, and sponsored search for complementary products on some eBay search results pages.

Yahoo's Web search functionality and site links, including its home page and Yahoo Mail, will be integrated into a co-branded version of the eBay toolbar. The eBay toolbar has been downloaded by more than four million eBay users.

Additionally, Yahoo and eBay plan to explore and deploy "click-to-call" ad technologies on their sites, accessible by users of both Yahoo Messenger with Voice and Skype. "Click-to-call" is a product feature link included inside ads, which consumers can use to directly call advertisers to pursue transactions.

eBay has been portrayed by some as a company under siege since Google launched its auction alternative, Google Base, late last year. The reality however, is quite different, say some analysts. "If we consider Google Base as the competitive threat, it has yet to gain traction in the auction space," Bill Tancer, general manager for global research at Hitwise, wrote in a blog post on Thursday.

Indeed, among the more than 18,000 sites in Hitwise's shopping and classifieds category, eBay ranks number one for market share of visits with just over 20 percent of visits to the category, according to Tancer. Google Base ranks number 2,158 with .004 percent for the same category. "The greater competitive concern from eBay's perspective is most likely to be Google Sponsored Listings as a competitive substitute to online auctions for small business," Tancer added.

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