Published May 25, 2006
NEW YORK – Yahoo Inc (YHOO) and Web auctioneer eBay (EBAY) Thursday announced a partnership designed to boost their position against Microsoft Corp. (MSFT) and Web search leader Google Inc. (GOOG), underscoring recent speculation the two companies could eventually merge.
Under the deal, Yahoo will be the exclusive third-party provider of all graphic ads throughout eBay's auction site. Yahoo has also chosen EBay's online payment system PayPal to allow its own customers to pay for Yahoo Web services.
In addition, Yahoo Web search features will be integrated into a co-branded version of the eBay toolbar, and the companies said they would explore developing "click-to-call" ad technologies on their respective Web sites.
"Click-to-call" provides a link inside an advertisement that allows consumers to directly call the advertiser to pursue a transaction.
Under the pact, which gives Yahoo access to eBay's vast base of online shoppers, the companies will begin to roll out their joint initiatives this year.
Shares of eBay rose 8 percent and Yahoo climbed 4 percent in pre-market trade following the announcement. Google shares fell 1.25 percent, while Microsoft shares were unchanged.
Talk of a combination between the Internet giants has been rife recently on Wall Street. It comes amid slowing growth and as competition among the biggest companies — Google, Yahoo, eBay and Microsoft's MSN — intensifies. Before Thursday, EBay's stock had been down 30 percent on the year, while Yahoo was off 20 percent and Google was down 10 percent.
"The biggest component here is the ability to monetize eBay traffic with Yahoo's brand," said Jefferies & Co. analyst Youssef Squali. "We see it as positive for both parties."
Yahoo and eBay said they do not expect the partnership to have a material impact on their financial results this year.