EBay to Google: It’s Your Party, but We’ll Fly if We Want to

A ploy to promote Google’s Checkout automated payment system has led auction Web site eBay to pull its Google search advertising, depriving Google of its largest single AdWords client.

The problem arose from Google’s plans to host a Checkout promotional event in Boston at the same time eBay was convening its annual eBay Live merchants’ conference in that city. Currently eBay does not permit merchants to offer Google Checkout on their eBay stores, allowing only the PayPal payment system, which it owns and which currently dominates the online payment industry. To add insult to injury, the title of the Google affair was “Let Freedom Ring”.

Google ultimately canceled the promotion a day before it was slated to occur. “After speaking with officials at eBay, we at Google agreed it was better for us not to feature this event during the eBay Live conference,” a post on the official Google Checkout blog said.

Nevertheless, early last week, eBay has pulled its pay-per-click advertising—estimated to have been worth $25 million last year—from Google’s search results pages. The company is characterizing the move as part of an ongoing “experiment” with its online ad channel mix.

Most analysts don’t expect the boycott will be permanent, simply by virtue of Google’s reach in search marketing. The engine dominates U.S. search with a current market share of more than 50%.

An eBay spokesman attending the Boston conference was quoted as saying that these online ad “experiments” commonly last about a week. But at press time about nine days after the boycott went into effect, the usual eBay search ads were nowhere to be found on Google results pages. In the past the auction company has managed Google keyword lists as large as 15 million terms. Google also delivers ads to some eBay international sites.

But some observers are saying the dispute could lead to other advertisers revolts against Google’s dominance of the online marketing sphere. “It’s the very first time a major advertiser has stood up to Google and Google has backed down,” JupiterResearch analyst Kevin Heisler said in press reports. “I think the most dangerous message it sends is that the other top advertisers may decide to follow eBay’s lead.”

And while the Google ad boycott has probably cost eBay sales, that price may not be as high as commonly thought. Bill Tancer, general manager for global research at online traffic measurement firm Hitwise, reported in his blog that click traffic both from Google to eBay and vice versa dropped about 7% between June 7, before the eBay ad pullout, and June 12. Tancer said the reason the dropoff was not more significant was that 25% of eBay searches coming from Google are not on pay-per-click ads but on brand, domain or navigational terms such as “ebay” or “ebay.com”.

Google and eBay have seen a number of their interests come if not into conflict, then within sniping range in the last year or so. The Google Talk voice over IP calling function has the potential to let the company avoid allying with a standalone service such as eBay’s Skype. And eBay took a small step into the ad delivery sphere last year with AdContext, a program that lets its affiliates promote other members’ auctions in return for a fee.