In an attempt to grab more online advertising dollars and defend themselves against competition, Yahoo and eBay have formed a new partnership.
Yahoo will now exclusively provide all graphical advertisements on eBay.com. The search company will also provide sponsored and improved search for some eBay search result pages and offer more up-to-date results from eBay's site to customers using Yahoo to search the web.
As part of the agreement, PayPal, a division of eBay, will begin exclusively providing online payment services for users of Yahoo services and offer payment options for Yahoo merchants and publishers.
Yahoo and eBay also said they'll explore click-to-call advertising technologies, a market that is increasingly attracting attention online. The technology allows users to click on an advertisement and be connected via a VoIP (voice over Internet Protocol) call to the advertiser.
The companies will also introduce a co-branded version of the eBay toolbar, which will include links to Yahoo Mail and the Yahoo home page.
Yahoo and eBay said they'd start testing some of the initiatives in the next couple of months, with plans to implement all of them next year.
Both companies realise Google is a dangerous competitor, and this partnership, as a defensive measure, is a smart move, said Rob Enderle of the Enderle Group.
"Much like Microsoft was in the packaged software space, Google is the company everybody is gunning for and represents the biggest threat," Enderle said.
As it's structured now, the partnership makes sense, but it could fall apart in the future, as Yahoo and eBay continue to develop competing technologies and services, particularly in e-commerce, Enderle said.
"It's a very thin line that divides the companies' [respective] e-commerce services. If that line gets crossed, the partnership could fail," he said. "But today, the partnership provides a reasonable match for the two companies."
Some view the deal as more positive for eBay than for Yahoo. "We see eBay as the big winner here. This deal should improve the position of an already very strong PayPal franchise. But what's potentially most thesis-changing here is eBay tapping into display advertising," wrote Citigroup financial analysts in a research note.