Yahoo! and eBay's Strategic Alliance
Yahoo! and eBay enter into a strategic alliance to pool their resources in an effort to boost their revenues and consolidate their position in the competitive Internet industry.On May 25, 2006, Yahoo! Inc. 1 (Yahoo!), the world’s largest online media company, announced its plans to form a strategic alliance with eBay Inc.2 (eBay), the world’s largest online auction company. Under their partnership, Yahoo would exclusively provide online banners and graphic advertisements at eBay’s site. In return, Yahoo! would promote PayPal3, eBay’s online payment service, as a preferred payment provider for purchases made online on the Yahoo! website. PayPal would provide an array of payment options to Yahoo!’s users navigating the web for shopping, auctions, and subscription services.
Commenting on the alliance, Chief Executive of Yahoo!, Terry Semel, said, “The deal offers great opportunities for both companies to share great assets with each other. It’s all about creating more value and a better experience for users as well as for advertisers.” 4 Yahoo! and eBay also planned to form a co-branded toolbar, which could be downloaded onto the user’s web browser, which in turn would direct the users to eBay’s auction site and Yahoo!’s search engine. On eBay’s site, the toolbar would provide links to the Yahoo! home page, Yahoo! Mail, and My Yahoo! options on the Yahoo! website.
Yahoo! and eBay further planned to collaborate on a click-to-call functionality, which would allow users navigating the web to contact advertisers directly through the phone instead of their websites. To make the click-to call functionality operational, eBay’s Skype 5 or Yahoo’s Messenger service would likely be used. The partnership between Yahoo! and eBay was expected to be completely implemented by 2007.
eBay sought to increase its advertising revenues through this alliance as Yahoo! had experience in search advertising. Catherine England, spokesperson for eBay, said, “We [currently] manage ads in-house and through a few affiliates. It was a variety of sources and its’ just not an area that we focused on. Through this partnership with Yahoo, we'll be able to leverage their expertise in that area.” 6
[1] Yahoo! was established in March 1995. It ranks second in the online advertising market, after Google Inc. The company had revenues of US$ 1.56 billion for the first quarter of 2006.
[2] eBay Inc., a leading e-commerce player, has around 200 million online auction users. The company had revenues of US$ 1.39 billion for the first quarter of 2006.
[3] As in April 2006, PayPal’s online payment service had 73 million accountholders in the US.
[4] Elinor Mills and Margaret Kane, “Yahoo-eBay deal a Google buster?” CNET News.com, May 25, 2006.
[5] Skype is a proprietary peer-to-peer Internet telephony (VoIP) network, which allow users to contact advertisers directly without picking up a telephone or searching or a phone number.
[6] Natali T. Del Conte, “Yahoo, eBay Strike Multi-Year Ad, Transactions Deal,” www.pcmag.com, May 25, 2006.
