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May 25, 2006

Yahoo one-ups Microsoft (and Google) with eBay deal

Posted by David Hunter at 10:14 PM ET.

Depending on which headline writer you believe, either Yahoo, eBay form alliance that will challenge Google or Yahoo, eBay deal ups pressure on Microsoft. Of course, Yahoo’s success in snagging eBay ad space and search business hits both of its major competitors, but we’ll quote the latter since it’s more specific to Microsoft:

Microsoft Corp. may need to cut prices or pursue a deal similar to Yahoo Inc.’s and online auctioneer eBay Inc.’s partnership to gain ground in the lucrative Internet advertising market, analysts said on Thursday.

Earlier on Thursday, the online media giant Yahoo and eBay said they agreed to a broad tie-up in the United States to boost their positions amid growing competition with Google Inc. and Microsoft.

The partnership between the two Silicon Valley giants, however, should not immediately hurt Google, whose dominance in Web search makes it impossible for companies like eBay to ignore, analysts added.

“The deal shows they need to be more creative and go after the advertising base more aggressively,” said Martin Pykkonen, an analyst at Hoefer & Arnett. “It does put more emphasis on whether you get there through an alliance or on your own.”

Under the deal, Yahoo will become the exclusive provider of graphical advertising on eBay, the biggest e-commerce player, and provide some search services within eBay’s site to connect buyers to items they seek.

In return, Yahoo will promote PayPal, EBay’s popular online payment system, as a way for Yahoo’s hundreds of thousands of affiliated Web sites and small business owners to conduct transactions online.

Yet Bruce Richardson, an analyst at AMR Research, said it would be difficult for Google and particularly Microsoft to win such large partnership deals because their competitors have no desire to make either company stronger.

Possibly, but as I have suggested previously, there’s no need to invoke Machiavelli, when ordinary business judgement will do. An Internet content site that wants to make money from ads and search will likely end up dealing with one of the big three, and would be foolish not to get the best deal possible given the current cut throat competition. The decision could have been as simple as who was willing to ante up the most.



Filed under Coopetition, Google, Live Search, MSN, MSN Search, Windows Live, Yahoo, adCenter

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2 Responses to “Yahoo one-ups Microsoft (and Google) with eBay deal”

  1. Microsoft in talks to buy eBay? -- Microsoft News Tracker Says:

    [...] One source close to the matter suggested the Yahoo-eBay tie-up would not stop Microsoft from pursuing the online auctioneer. Au contraire, I’d say that last week’s deal between eBay and Yahoo would seem to indicate that the chances aren’t too good for a Microsoft acquisition. If the talks were at a serious stage, wouldn’t the Yahoo deal have been delayed? [...]

  2. Google gets prime position on Dell PCs -- Microsoft News Tracker Says:

    [...] Finally, as I mentioned in the immediately prior post, one needn’t look for conspiracy in Dell selling their crop of eyeballs for as much as they can get in today’s sellers market. If Microsoft really wanted to keep Dell on board, they could always have paid even more. In the meantime they can can always use it for Windows antitrust insurance – again quoting Joe Wilcox: By the way, deals like this would have been nearly impossible before Microsoft’s US antitrust case. The landlord (Microsoft) covets his property (Windows). He doesn’t like redecoration (changes to the desktop) or subletters (the likes of Google software or services bundled instead of Microsoft stuff). Filed under Coopetition, Legal, Google, Governmental Relations, General Business, Antitrust, Dell, Microsoft   [Permalink] [...]

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