Google to Serve Ads to eBay’s International Sites

eBay said Monday it had signed a multiyear pact with Google to have the search giant deliver ads, including click-to-call functionality, for its auction and e-commerce sites outside the United States.

The contract calls for Google to do at international sites what Yahoo earlier this year won the right to do at eBay’s domestic site — deliver contextual ads, and develop the ability for users to reach eBay sellers directly using Internet voice chatting technology.

Keeping Up With the Yahoos

Under the deal — financial terms of which were not disclosed beyond the fact that some parts of the agreement call for revenue sharing — Google will become the exclusive text-based advertising provider for eBay outside the United States, and the two firms will work together on click-to-call ad technology that uses both eBay’s Skype and Google Talk.

“By combining the power of eBay in e-commerce and Skype in communications with Google’s leadership in search and advertising, we can increase the usefulness of the Internet for shoppers, merchants and advertisers around the world,” said eBay CEO Meg Whitman.

Some observers were surprised when, in May, eBay struck a far-reaching partnership with Yahoo to deliver ads at the U.S. site and work together on new search and ad technologies.

“This agreement underscores how much we value eBay as a partner,” Google CEO Eric Schmidt said. “We are offering advertisers another innovative way to connect with customers.”

Around the World

Google will start serving up both kinds of ads on a test basis in some markets early next year, the companies said.

As part of the deal, Skype will begin offering users the option of downloading the Google Toolbar, which will include a custom button for making PC phone calls.

Google and eBay have partnered in the past, but have not always seen eye-to-eye. eBay, for instance, banned Google Checkout as a payment option for its sellers, and the Google Base project started by the search engine is considered by many as a direct threat to the classified areas that eBay has moved into aggressively by buying Rent.com and a stake in Craigslist.

In May, eBay signed a sweeping search and marketing deal with Yahoo, establishing it as the provider of ads in the U.S. eBay said it would work together with the portal to develop new search and ad technologies, including click-to-call. That deal, which also called for Yahoo to promote eBay’s PayPal as a payment option to its network of merchants, capped a week of speculation that had some predicting the two companies were poised to merge.

Investors in both companies cheered the latest move, with Google shares up 1.5 percent in midday trading Monday to US$379 and eBay stock rising 1.7 percent to $25.73.

Picking Partners

For Google, the deal is the latest embodiment of a new strategy that involves a heavy emphasis on partnerships, a departure from its early days as a company when it grew organically and by constantly expanding into new areas, including those where existing Internet companies already dominated.

Other recent deals in the same vein include an agreement that made Google the distributor of video clips and downloads for Viacom’s MTV Networks and a $900 million deal that installed Google as the exclusive search provider for the popular MySpace.com social networking site.

The eBay deal helps in the international arena, an important engine of growth for both companies, said Deutsche Bank analyst Jeetil Patel.

“Google adds a major traffic partner to its international network, while eBay better monetizes its European sites more fully,” Patel wrote in a research note.

While eBay may have been reluctant to enrich a sometimes rival, it likely recognized that Google was the only company that had the network in place to provide strong advertising revenue from its overseas sites, said Greg Sterling, founding principal of Sterling Market Intelligence.

The part of the deal with the biggest potential impact is the pay-per-call aspect, which could become a test model for advertising that Google eventually brings back to the U.S., added Sterling.

“The idea is to connect buyers and sellers over the phone and use that as an ad vehicle, charging for each call connected,” he explained. With a rigorous test under its belt, Google may well move aggressively to launch the model in the U.S. “The pay-per call market would break open if Google or Yahoo entered it in a real way.”