The online auctioneer is aiming to curb Google’s power
eBay Inc., the world’s largest online auctioneer, has had talks with both Yahoo Inc. and Microsoft Corp. to determine whether one of them might be a suitable ally over plans for a "mega-merger" aimed at thwarting the ever-increasing dominance of Google.
The talks, which are certain to face US regulatory scrutiny, are thought to focus on eBay pushing a greater proportion of its $US400 million ($US536 million) global online marketing expenditure towards either Microsoft or Yahoo. Ultimately, one side could take an equity stake in the other.
California-based eBay is understood to have begun talks last year about a tie-up with the two companies, aimed at muting the power of the world’s biggest search engine.
Although eBay, which was founded in September 1995, already advertises with the three search engines Google, Yahoo! and Microsoft — and is linked to Microsoft through its MSN service — the bulk of its spending has traditionally been with Google, which accounts for about 42.3 per cent of total search queries.
After years of working closely with the search giant, eBay last year became alarmed as Google started assaulting its turf in multiple ways, the report said, including creation of a competing classified advertising service, the report said.
The relationship had proved fruitful for both, with Google directing its users towards eBay’s buying and sales site. But recently Google’s status as a potential threat to eBay, as its empire-building continues, has become more apparent.
Google, established seven years ago, has launched a payment service similar to eBay’s PayPal to handle credit card processing for customers. In a further push into eBay’s territory, it has launched Google Talk, a service that allows users to talk to one another over the internet. This is similar to eBay-owned Skype.
Last year Google launched a new service called Google Base which, like eBay, allows web users to meet online to buy and sell goods and services. The service has already caught on, with around 45 million listings.
Unlike eBay users, Google Base customers pay nothing to list their goods.
Although Google has officially denied it is seeking to woo customers away from the auctioneer, it has begun to move into similar areas.
Recent concerns about the threat to eBay helped to send its shares down 4.57 per cent to close at $35.09. The drop came after first quarter results showing a slowing of growth year-on-year.
The company also failed to raise its 2006 forecast of revenue of $5.7 billion to $5.9 billion.
In a note to clients, one broker wrote: “We are becoming increasingly concerned regarding the sustainability of growth for the company and its ability to achieve expectations in coming quarters.”
Jordan Rohan, an analyst for RBC Capital Markets, said: “The novelty has worn off.”
Consumers were increasingly comfortable finding things to buy through search engines such as Google or on comparison shopping sites, he said. Its sales pushed past the $US2 billion market for the first time.
In contrast Google’s shares soared by nearly 9 per cent at close after the company, based in Mountain View, California, and reported a strong set of figures with first quarter net income of $592 million, up from $369 million from a year earlier. Its sales pushed past the $2 billion market for the first time.
Under one scenario, the talks could lead to an alliance in which eBay would boost its advertising spending with its chosen partner and provide access to data it has collected about its consumers, the report said.
The report said it remained unclear how much money might be involved and whether the parties have considered a more complex deal, such as one side taking an equity stake in the other.
David Bradshaw, principal analyst at Ovum, the telecoms and media research agency, said: “EBay is clearly feeling a bit uncomfortable about the fact it is giving all of its money to Google and that Google is beginning to encroach on some of the things that it does as. It knows it is a dangerous situation to be in.”
A spokesman for eBay declined to deny that the group is in talks about a tie-up. He added: “We work with all three of the major search engines.”