The whole drama is about Google inviting eBay’s largest sellers in Boston for their annual convention to extol the virtues of its fledgeling Checkout online payment service, a main competitor for eBay’s Paypal. This happened this Wednesday, June 13th, and eBay decided to retrieve his advertising budget from its Adwords account (about $100 million a year).
The Event was eBay live, a huge eBay’s sellers convention, and Google had set up the onsite promotion of Checkout as “the Freedom Party” (freedom from Paypal).
Ebay is the number one advertiser on Google, with a budget double the amount of the secondly ranked (Target), and Paypal provides a quarter of the eBay’s Corp. revenue, about $1.4 billion. Google wants to spread the use of Checkout: who’s going to have the last word?
eBay had a similar Freedom party experience before. The auction company tried to launch its own payment system in front of an audience that was wearing Paypal shirts, given away at a party just like the one Google was proposing to throw. This could not happen again to eBay.
At the Freedom Party, attendees were all invited for free drinks, food and massage. eBay is rejecting Checkout from its online marketplaces, saying that it had yet to prove itself in terms of fraud protection. Google is just leading its lobby campaign to promote Checkout.
This type of steal-the-attention kind of strategy was set up by Alibaba (eBay rival in China) last year during the same eBay Live show in Las Vegas. Alibaba executives had rented the restaurant on the top floor of the building where the show was going on. After a failed attempt from eBay executives to rent the restaurant from under Alibaba, these executives eventually forced Alibaba to remove all of its signs.
Google owns 50% of search queries in the USA, and 80% in Europe. No doubts advertisers need Google. In August 2006, Google and eBay signed a deal that allows the two companies to share revenue on search-related text advertisements delivered on eBay's sites outside of the United States, shutting down Yahoo!’s exclusive rights to supply sponsored links to eBay. Right there, eBay opened up its advertising options, comparing performances from different search engines. The deal also implied for Google to bundle Skype into its search toolbar.
This has turned into a game of locked partnerships, with Google teaming up with Myspace and Time Warner’s AOL, and MSN teaming up with Facebook. Advertising is key when looking at keeping strategic and powerful partners on their sides. This explains why so much money has been poured into online advertising investments in the past few months (aQuantum, Double Click).
Advertising ties big corporations to the Internet. Online advertising isn’t a short-term solution for cash, but a long-term strategy for locking market shares. This is why Microsoft Corp. is trying to derail Google's pending $3.1 billion acquisition of online advertising firm DoubleClick by complaining to the Federal Trade Commission about antitrust concerns.
To sum up, Google tried to fool eBay, but Google needs to keep eBay away from competitors (MSN and Yahoo, the ex) who are aggressively acquiring online advertising infrastructures to grab strategic advertisers to gain market shares over Google’s.
Maybe this wasn’t such a good move from Google, because when you look at their business synergy, cutting eBay’s legs is like puncturing Google’s own tires.
