May the Great eBay, Google, Microsoft, Yahoo! Games Begin!
In a front-page article labeled Behemoths' Dance, the Wall Street Journal reports today that eBay is trying to find ways to lessen its dependence on Google by forming closer alliances with Microsoft and/or Yahoo!
Of course, I've seen the AdSense ads for eBay when I enter a search term such as antiques or Nikon D200. In fact, almost any search term query at all that might possibly be something one might buy brings up (among other AdSense search ads) an ad linking to eBay mentioning the item.
The eBay ads via Google cover so many terms that they sometimes overreach. I'll bet you didn't know you could buy thoughts on eBay. A Google search for thoughts returns this eBay ad:
Thoughts
Whatever you're looking for
you can get it on eBay.
www.eBay.com
Well, I gosh darn sure hope I can't buy what I'm thinking of right now on eBay (and, no, I won't tell you—it's private!).
In another example of overreaching in ad placement, a search for the term cliff returns (along with search results) this ad:
Cliff
Looking for Cliff?
Find exactly what you want today.
www.eBay.com
Now, I know you can find most things on eBay, but I haven't seen that many cliff auctions lately. Maybe I'm missing something. What I also seem to have been missing, at least according to the WSJ article, is the extent of money eBay pays Google—according to the Journal, eBay won't give out numbers, but a big chunk of its $400 Million annual online ad budget goes to Google—and the extent to which Google's traffic is vital to eBay. (On a personal note, when I want an eBay auction, I go straight to eBay. I can't remember having clicked through to eBay from a Google AdSense search ad.)
When eBay started placing these huge ad buys with Google starting in 2001, eBay did not regard Google as a competitive threat, just the vendor with the best search engine technology. In fact, eBay probably felt that as the customer spending the money they had the upper hand in the eBay-Google relationship. (A side note here: isn't it amazing how Google has been able to take advantage of the behemoth internet players to gain its current position, first honing its search engine technology at Yahoo's expense and then gaining literally billions of dollars of easy revenue from eBay since 2001?)
As Google's tentacles began to stretch wider, eBay came to consider whether Google was, in fact, a threat—and to wonder whether eBay's now deep dependence on traffic from Google constituted a giant vulnerability.
Certainly, Google wants to be the leading online entry point for online commerce, although it has a ways to go to achieve this ambition. Google Base, a free online classified service, is at least indirect competition to eBay—and direct competition to Craigslist, part-owned by eBay. Google is also developing an online payment service to compete with eBay's PayPal, although the Google service has yet to manifest itself in a serious way, and PayPal's ubiquity will be hard to rival.
eBay's response to all this is marked by internal confusion. At a summit meeting of eBay executives that met in the summer of 2005, role-playing was used to assess the threat. A "green team" thought from eBay's perspective and concluded that there was no threat and that business-as-usual should continue. In contrast, a "red team" thought from Google's perspective, and concluded that Google was planning a move into eBay's primary turf.
Clearly, eBay insiders are divided. As the Journal puts it, "Indecision within eBay will probably delay any conclusion." In the meantime, eBay is holding discussions with Google rivals Microsoft and Yahoo. Also, eBay's new WantItNow site is a shot across the bow of Google as online ecommerce entry point.
Often, I just want to buy something and not deal with the hassle of an online auction. In the past, I could have browsed through eBay looking for a Buy It Now button on the thing I wanted. But this was cumbersome. So usually I just put the item into Google or Yahoo (but mostly Google), and found someone to sell it to me. WantItNow features only items that are immediately available. It is an attempt to counteract this dangerous—to eBay—trend of using Google to find items available for immediate purchase.
It's not clear what will happen in the great eBay-Google-Microsoft-Yahoo games. These games will be great fun to watch, and are significant for the future of the web. The outcome will no doubt be studied in business schools of the future. For the meantime, the only thing that's really clear is that eBay does risk becoming marginalized by Google. In this scenario, eBay becomes simply another backend product supplier, and Google controls the gateway. Most likely, eBay continues to be viable (after all, why should Google choke such a good source of revenue?), but the brilliant future belongs to Google.
Posted by Harold Davis at April 21, 2006 10:13 AM
