• by Masha Geller , May 12, 2002

What’s going on at AOL? First, the company surprised everyone when they decided not to renew their deal with Overture – the undisputed leader of the pay-for-performance search listings group – and went with Google, which only recently began offering the paid search listings service.

Another interesting announcement came late on Friday, when eBay - the popular auction site and a major advertiser on AOL, cut its long-term ad commitment with the giant by about 20%, providing another indication of how the online ad business remains depressed and could pressure results at Internet content sites.

Both sides are using the soft ad market as the primary excuse.

Following the announcement, several experts agreed that although the loss to AOL from the new eBay deal is not significant in itself - less than $4 million a year - but it could be an ominous sign for other lucrative ad deals AOL entered into a few years ago, all of which are gradually coming up for renewal.

In its SEC filing, eBay said it amended the advertising agreement to spend $18.75 million on AOL in the year ending March 23, 2004, to one worth about $15 million. EBay is still obligated to spend $18.75 million on ads on AOL through March 23, 2003, the filing said.

Interestingly enough, the new deal is also contingent upon certain performance goals being met; if they are met, AOL would have the right to extend the agreement through March 23, 2005, with an obligation for an additional $10 million in ads.

EBay also said it amended an ad representation agreement it has with AOL to adjust the commission structure, reduce the term of the deal by nine months and give AOL a one-year extension option should certain goals be met.