Blog Insight: Showdown at the Dotcom Corral

by Dan Blacharski

June 19, 2007 —

What bloggers are saying about the latest in information technology

It seems eBay and Google are at war with one another. Google announced it would throw a party in Boston to distract eBay sellers attending the eBay Live seller conference, in response to eBay's decision to disallow the Google Checkout online transaction system from the eBay auction site. Google Checkout competes with eBay's entrenched but often maligned PayPal checkout system. Google countered by pulling their ads from the Google AdWords network. Google canceled the party, but eBay's sticking to its guns, withholding its ad dollars and continuing to forbid its merchants to use the Google Checkout system. Scott Wingo's eBay Strategies blog has a good summary of the entire episode from the beginning. Scott wonders who will hurt worse in the end, and suggests it will be eBay, who is reliant on quality Google traffic -- while other advertisers will fill in the loss that Google will suffer from the lack of eBay ads.

eBay is the largest paid search advertiser in the country, and Google is the biggest search engine referrer. One would think that Google and eBay need each other, and in fact, their petty spat may have negative consequences for both parties, and the Valleywag blog suggests that the "uneasy peace" between the two dotcoms is officially over. Valleywag has some interesting insight, suggesting that the uneasy truce that existed up until now was the result of a deal, where eBay bought up to $100 million a year in text ads, and Google promised to stay clear of the online retail business.

Both sides are on the defensive, and eBay claims the withdrawal of ad dollars from the Google network has nothing to do with Google's anti-eBay party, but it's pretty plain to see from the timing what's going on. TechDirt noted that eBay insisted that the withdrawal of its Google ad dollars was just an "experiment" in allocation. In fact, as the TechDirt blog suggests, it's a "warning shot." But should eBay be firing warning shots? Maybe the auction company is running scared. Plenty of merchants have become disenchanted with eBay recently, and the running commentary on the TechDirt blog reflects that -- with plenty of merchants rooting for Google to roll out a full-fledged auction site competitor. There's plenty of anecdotal evidence in the blogosphere to indicate that eBay is losing long-time merchants, because of a variety of reasons, including increased service fees, poor customer service, and what many perceive to be unfair practices of PayPal.

The ZDNet blog is a bit more optimistic, giving eBay perhaps a bit more credit than it deserves, suggesting that the company wouldn't shoot itself in the foot just to get back at Google. But time will tell, and Farber and Dignan also suggest that the real results will come in the third quarter, which will show how much eBay really does need Google -- and that eBay will have to turn back on the tap on Google advertising.

eBay doesn't like competition from Google, and decided to play hardball. Google competes with eBay not only from its Google Checkout, but also from its recently released Google Base listings service. If the two could play nice together, it would be better for both companies -- eBay merchants need the Google AdWords exposure, since other paid click providers don't handle anywhere near the volume of referrals. And of course, as Google's biggest advertiser, Google would do well to keep the relationship going as well.

The big problem with eBay's decision to pull the Google ads is that it doesn't just affect Google. eBay itself is a big company, but observers -- and eBay itself -- lose sight of the fact that the large company eBay is in reality made up of tens of thousands of smaller companies. The decision is a great disservice to the sellers that make eBay what it is.

ITworld.com