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Monday, August 28

Google's Latest Deal - Is eBay Sleeping with the Enemy?

Internet heavyweights Google and eBay have announced a new deal that will have many wondering whether eBay is sleeping with the enemy. While the new deal is good for both parties on paper, considering the number of services that the two companies compete on, one does wonder who gains the most from the partnership.

The new alliance will see Google exclusively supply contextual text ads to eBay's non US sites. eBay signed a similar deal with Yahoo! in May this year for their US pages, but it's Google's international search strength that has seen it secure the non US deal.

The second part of the deal will see the two companies partner on a click-to-call advertising model available on Google's AdSense and eBay's product listings. The new system will allow internet users to use either eBay's Skype service or Google Talk to communicate directly with advertisers.

While click-to-call is not a new concept, the challenge has been find a VoIP facility that makes the program cost effective for advertisers and searchers alike. With the mass appeal of Skype and the extensive reach of Google's advertising and eBay's marketplace, this could be the first viable test of the click-to-call concept. Both companies will split the revenue derived from the click-to-call model, with no exact details on the how it will be shared.

For those not familiar with the rivalry that exists between these two internet powerhouses, these are the services that each company offer which are in direct competition:

Classified/Listing Service:
eBay Marketplace vs. Google Base

Free VoIP Services
eBay's Skype vs. Google Talk

Online Payment Systems
eBay's PayPal vs. Google Checkout

When you compare the various services, you realize that these service markets are actually being dominated by eBay's offerings. This new deal could be a sign that Google is resigning itself to eBay's strength in these areas, and has decided to join them rather than try to beat them.

From eBayâ€™s point of view, the deal will allow them to harness Google's search strength to drive more visitors and additional revenue to their highly trafficked internet network. The click-to-call program, should it prove successful, will also help them monetize their very popular Skype service, and help increase its market domination.

The synergies of the deal should be lucrative for both parties. It will also increase the barriers to entry for other players trying to enter markets dominated by both companies. eBay shareholders are obviously excited by the company's decision to join forces with Google, as its share price rose on announcement of the partnership.

For Google, it's the third major deal in a matter of weeks. Now the search giant has secured agreements with social network icon MySpace, entertainment titan MTV and now online marketplace goliath eBay. Who's left in Google's quest to conquer via collaborative partnerships?