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Growing tensions among big Internet competitors

Jun. 15, 2007

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Last week, giant eBay has completely stopped buying Google AdWords in an apparent retaliation for a now-canceled event meant to create support among eBay vendors for Google Checkout. Overall, this is a sign of the growing tensions between large Internet competitors.

This little 'war' began when Google announced it would hold an event that coincided with the beginning of eBay Live, the annual gathering of eBay sellers and affiliates taking place in Boston.

Meanwhile, eBay has since confirmed that it had shifted its ad spending away from Google AdWords, the search giant's paid keyword program. eBay called the the move as part of an "ongoing experiment" to test-drive various advertising options, and occasionally shift its mix of media buys.

Google's gathering was planned at encouraging eBay sellers to demand the auction site allow the use of Google Checkout, its online payment system. As could be expected, eBay has strongly urged its sellers to use its PayPal service as the preferred option for closing auction and fixed-price sales, and has not opened the site to Checkout.

The timing suggests eBay was very upset about Google's event, appropriately dubbed the "Google Checkout Freedom Party."

The auction giant reportedly cancelled all its ad purchases by June 6, early in the morning. Later that day, Google nixed its own planned event in Boston through a blog post from Google Checkout Team member Tom Oliveri.

"eBay Live attendees have plenty of activities to keep them busy this week in Boston, and we certainly didn't want to detract from that activity," Oliveri wrote. "After speaking with officials at eBay, we at Google agreed that it was better for us not to feature this event during the eBay Live conference."

Oliveri added "Google is constantly reaching out to new users and sellers, and we are available to privately discuss any matters of concern with individuals as they relate to Google products."

The Google / eBay partnership has long been rife with tension, with each company eying many of the same online opportunities.

For example, Google Base competes with CraigsList, the funky classified site that eBay has invested in, and Google Checkout was initially planned as a huge competitor to PayPal.

Overall, eBay has partnered extensively with Google rival Yahoo, striking a multiyear deal in March that called for the two to work more closely together in other areas as well, with the Yahoo Wallet service using PayPal and with cooperation around new technology to take advantage of eBay's Skype Internet calling service.

Google had hoped to use the concentrated gathering of eBay devotees to build support for Checkout, apparently seeking to create grassroots support for opening up the auction site to the payment alternative, which lets shoppers store credit card information and use a simple log-in and password to make payments to merchants across the Internet.

Google invited eBay sellers to board a trolley and travel to an important site in pre-Revolutionary history, the Old South Meeting House, for the meeting.

Google wrote in an invitation posted to the Google Checkout blog "we'll use the same place where revolutionaries launched the Boston Tea Party to celebrate freedom with free food, free drinks, free live music, even free massages."

eBay Live attracts many vendors who sell services and products to eBay users -- such as automated auction programs and items to support their businesses. However, the event is mainly a chance for eBay to foster a stronger sense of community among its users.

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Every year, eBay treats its attendees to entertainment, motivational speeches and a keynote from CEO Meg Whitman. According to both comScore and Nielsen//NetRatings, eBay is Google's largest single AdWords customer in the U.S.

For 2006, comScore estimates that eBay spent nearly twice as much as the No. 2 AdWords customer, Target. "RBC Capital Markets analyst Jordan Rohan says that "eBay spends around US $25 million a quarter on AdWords. This is just a fraction of the $3.7 billion in revenue Google raked in last quarter -- the vast majority of it from paid search listings.

Nevertheless, this little war is heavy with symbolism, especially since Google has claimed that its Checkout service was not meant to compete directly with PayPal, which specializes in small payments and those between individuals, rather than those between consumers and merchants, said search expert John Battelle.

At the same time, eBay may get as many as 12 percent of its visitors through Google searches each month, Battelle added, suggesting a co-dependence that eBay may have been trying to break with the Yahoo deal.

Forrester Research analyst Carrie Johnson said "in many ways, all of the major Internet companies have been converging on the same, increasingly crowded band wagon."

Johnson added "where once there were bright lines dividing major Internet companies, eBay has since moved into Amazon's fixed-price retail world, while Google built itself up into more of a portal to compete directly with Yahoo and AOL and added the payment functionality, which put it on a direct collision path with eBay.

Across the industry, the potential for showdowns has grown substantially as each company has moved into new areas through acquisitions, as well. "A lot of the partnerships now in place date from a time when there was much less overlap and direct competition," Johnson said.

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Source: eCommerce Times

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