A tiff over competing online payment systems leads the auction site to kill ads and the search engine to cancel a party.
Los Angeles — Online auctioneer eBay Inc. has pulled its advertising from search engine company Google Inc.’s AdWords network in the United States this week because it was mad about Google’s encroaching on its turf — both literally and figuratively, an eBay spokesman said Wednesday.
What peeved eBay enough to yank its ads? A party!
eBay is one of Google’s biggest advertisers. The search engine funnels millions of Web surfers to the auction site. But the two companies have grown increasingly competitive as Google has stepped up promotion of its Checkout online payment program, which targets a market similar to eBay’s PayPal service.
A source familiar with the situation said the move is an angry reaction by eBay’s management to Google’s decision to hold a protest party concurrent with the start of eBay Live, the company’s annual conference for merchants.
However, eBay has kept its AdWords campaigns outside of the U.S., eBay spokesman Hani Durzy said Wednesday.
Durzy characterized the decision to pull the U.S. Google ads as an instance in a continued experiment eBay does to determine the best allocation of its advertising and marketing budget.
Google invited attendees of eBay’s big sellers’ conference in Boston to come to a shindig tonight, scheduled to start shortly after eBay Chief Executive Meg Whitman gave her welcoming address.
Google has been reaching out to media to promote the party, aimed at eBay merchants who are upset that eBay does not allow them to use Google’s Checkout online transaction system.
Google offered trolley service to bring conference-goers to its “Let Freedom Ring” event at the historic Old South Meeting House — and rally against eBay’s refusal to let sellers advertise in their listings that they accept Checkout payments.
eBay Live begins Thursday evening in Boston, which is the time and place Google has chosen for its protest party.
This source also said the situation is fast-developing and fluid, with high-ranking eBay executives holding meetings right now to discuss the extent of the decision.
“When we heard of their plans to have their party and the way they were marketing it, we were disappointed,” said Durzy. “We felt that was not an appropriate way for one partner to act toward another.”
eBay has said that Checkout, introduced about a year ago, does not have enough of a track record yet, while Google argues that eBay is just trying to protect its own PayPal online payment system.
Durzy would not say whether the decision to shift ad dollars away from Mountain View, Calif.-based Google was related to the party, stating only that eBay often “experiments” with its ad spending to gauge its effectiveness in drawing traffic to its site.
The pullout breaks the link between the largest paid search advertiser in the U.S. and the country’s largest paid search ad network, and will likely create a situation that hurts both companies.
In March, eBay ranked first in the U.S. among paid search advertisers with 802 million sponsored link exposures, or 4.1 percent of the total, according to comScore Networks Inc. eBay’s pull is even bigger if one factors in its comparison shopping engine Shopping.com, which ranked third on that list with 357 million sponsored link exposures, or 1.8 percent of the total.
But analysts believe there is a direct connection. Deutsche Bank analyst, Jeetil Patel, called eBay’s move “truly retaliatory.” Martin Pyykkonen at Global Crown Capital, called it a “soap opera.”
Google backed down Wednesday and canceled the party. “eBay Live attendees have plenty of activities to keep them busy this week in Boston, and we did not want to detract from that activity,” a Google executive wrote on the company’s blog.
In a statement, Google said, “We do not comment on individual advertiser relationships or spending. eBay has been a longtime partner and we look forward to continuing our positive relationship.”
But the spat may carry financial consequences for both companies.
In other words, this situation likely creates a significant hole in paid search referrals for eBay and in paid search ads for Google in the U.S.
Relations between eBay and Google have been strained in recent years, as Google has morphed from a partner into a partial competitor with new products like Checkout and its Google Base listings service.
In May of last year, eBay and Yahoo struck a wide-ranging partnership that, among other things, made Yahoo the exclusive provider of search and display ads within U.S. eBay sites.
Although Google performs a similar function for eBay sites outside of the U.S., the eBay-Yahoo tie up was seen as a defensive move by eBay and Yahoo against Google.
In its official party announcement, Google clearly stated its intention to rattle eBay during its merchant conference this week.
“Are you an online seller attending eBay Live! in Boston this week? If so, join us for a celebration of user choice at the Google Checkout Freedom Party on Thursday night (6/14),” reads Google’s blog posting invite.
Meanwhile, analysts believe Google gets tens of millions of dollars a year in advertising revenue from eBay. The two also have a partnership to share revenue from advertising on eBay’s auction sites outside the U.S.