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Summary:

The recent squabble between Google and one of its biggest customers, eBay might have seemed like a catfight, but it also hinted at a new eBay strategy to shift their advertising dollars to non-Google destinations and networks. As background, the eBay-Google hostilities spilled over into press […]

The recent squabble between Google and one of its biggest customers, eBay might have seemed like a catfight, but it also hinted at a new eBay strategy to shift their advertising dollars to non-Google destinations and networks.

As background, the eBay-Google hostilities spilled over into press after Google scheduled a Checkout Freedom Party in Boston, right when eBay was hosting its developer conference in Boston. eBay threw a hissy fit and temporarily suspended buying Google keywords. Google worried about lost revenues canceled the party.

The auction giant will slowly turn back on Adwords based advertising over next few days, but the volume of spending will decline from historical levels, according to an eBay spokesperson we chatted with earlier today.

The company recently experimented with non-Google networks and destinations and found that non-Google traffic sources could make up for Google-driven traffic. EBay worked with Yahoo, Microsoft, AOL and scores of smaller Internet properties to drive traffic to its auctions. It is a smart move – the desperation of Yahoo and Microsoft to compete with Google would prompt them to give better terms to eBay, which can thus streamline its margins.

According to Citibank analyst Mark Mahaney, eBay accounted for perhaps 2% of Google’s gross revenue and profits in 2006. Google has been one of eBay’s largest provider of leads, currently accounting for 5% of its traffic, he estimates.

Ebay’s decision would be a set-back for even Google, given the large amount of dollars eBay spends with the search giant.

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By Om Malik

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  1. eBay to dial down spending with Google · New York Articles Friday, June 22, 2007

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  2. That’s one expensive party! (that never happened too)

  3. Huh. One of the first things I do when setting up an adsense blog is add ebay.co.uk, ebay.de, ebay.com.au etc to my Competitive Ad Filter. Not because they’re competition, but because they pay so poorly. I guess this is a bummer for Google, but not bloggers (or anyone that relies on Adsense revenue).

  4. We will all miss the ads such as:

    Looking for Homelessness?
    We’ve got what you are looking for.
    Find it on eBay.
    http://www.eBay.com

    Before the Boston fiasco eBay had already changed their policy by not allowing affiliates to drive any PPC traffic through Google, Yahoo or MSN so this latest change, like you say Om, is part of a rebalancing of advertising on their part.

  5. It’s possible that EBay conversions from Google Ads aren’t that great to justify the adwords spend.

    For instance, if CPC was $.10 and conversion rates were 5%, then EBay would have to make at least $2.00 in revenues to justify paying for the click.

    Having fewer bidders for keywords may mean lower bids and lower resulting CPC’s for a lot of keywords in Google’s inventory (EBay seems to bid on a lot of words on Adwords).

  6. I wonder where eBay will spend all that money in the future…

    Y!-search? Webcrawler? Altavista? There has to be another search engine! ;-)

  7. MS and Yahoo lost margin, but Google lost revenue and the risk that other will follow Ebay.

  8. TanNg,

    you have hit the nail on the head and i think this is the key – more players in the market can add margin pressure.

  9. Alt. Search Engine Friday, June 22, 2007

    Lets just hope that other ‘big’ Google customers follow the trend (Ref – TanNg). Not much 5-10% will do:-p

    Please try Alt. Search EngineS

  10. The circle of round has go down…..

    http://mclip.wordpress.com

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