WSJ: eBay Talking with Microsoft, Yahoo

eBay reportedly is talking to both Microsoft and Yahoo on ways that either company could collaborate with the auction site to fend off Google. The search giant has long been an ally of eBay, however Google's recent moves are making the San Jose, Calif., based company nervous.

Google recently introduced Google Base, a service that eBay sees as direct competitor to its own listings. Also, the search engine has been developing an online payment system that sounds similar in concept to eBay's PayPal. Additionally, Google has hired away several engineers and staff from eBay.

According to a Friday article in the Wall Street Journal, the paranoia over Google reached such a fevered pitch at eBay that it triggered a Summer 2005 meeting of executives. In a role-playing exercise, eBay's leaders determined that it was likely that Google would attempt to make a move on the company's core business.

In turn, eBay began simultaneous discussions with both Yahoo and Microsoft last Fall on how to best combat the new threat. Any deal would likely include a larger chunk of ad spending with that partner, as well as information on eBay's customers. A deal similar to the Google-AOL partnership could also emerge, some insiders speculate.

However, eBay is dependent on Google, and the search engine remains by far the largest on the Web. The company has been buying thousands of keywords, where eBay's sponsored link gets top billing on the search result pages.

This means Google provides three times the traffic to eBay than any other search engine. Thus, weaning itself off of Google may be detrimental to the auction site, analysts say. On the Web, revenue is driven by traffic, and without a strong source of new visitors, cutting Google off may affect eBay's bottom line.

The company has so far downplayed speculation of such talks, but sources close to the matter seem to indicate that eBay's agreement with Google will either change substantially, or be discarded entirely sometime in the future.

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