AOL and eBay Reportedly Discuss Partnership

Reports are circulating that e-commerce powerhouse America Online and auction site eBay are in talks that could possibly result in AOL’s taking a minority position in eBay. AOL declined comment and eBay execs weren’t immediately available. Though, AOL’s CEO Steve Case has reportedly told the Wall Street Journal that eBay is one of the Web businesses he most admires.

Not surprisingly, investors jumped on the news, pushing eBay’s stock up 6% or 13.88 points to 245 this morning. (eBay’s 52-week range has been from 21.25 to 321.) AOL shares have remained steady on the news, hovering around 158.56. (AOL’s 52-week range has been 27.5 to 177.5.)

eBay has approximately two million registered users who, according to Media Metrix, stay online an average of 27 minutes and are, therefore, considered to be a particularly attractive audience for AOL’s Web advertisers.

The companies are reportedly discussing how to work more closely together, and raising the possiblity of developing joint content, so that AOL users wouldn’t have to leave the service completely in order to visit eBay. eBay execs are said to be excited at the possibility of additional revenue from such a prestigious partner. And, with good reason, considering that AOL’s 16 million registered users are perfectly suitable for eBay’s consumer-oriented auctions.

eBay is also said to be interested in AOL’s local service, Digital City, which would potentially provide a wedge through which eBay could drive sales of used cars, furniture, and other types of products that are usually purchased from a local merchant.

Competition and Customer Support Problems

With the entry of Yahoo! into the online auction market, a collaboration between eBay and AOL presents great benefits for both companies. Yahoo!’s new auction venture received wide publicity yesterday with the auctioning of O.J. Simpson’s personal property and sports memorabilia, including his famous Heisman trophy.

Meanwhile, eBay, a victim of its own success, continues to be plagued by technical and organizational challenges. The online auctioneer has announced that it has now stopped providing live customer service to its customers.

According to a company spokesperson, the live format “outgrew [eBay’s] ability to answer these questions in a timely fashion,” and is being renovated. Urgent questions are being answered in 24 hours. A spokesperson for eBay said the firm’s support department currently receives around 65,000 e-mails a week.