: Of course, as soon as I post this, eBay ads are back up and running. I knew that would happen.
eBay and Google are two companies up to their knees in coopetition – the intersection of competition and cooperation (Rob Solomon taught me that one). eBay has PayPal. Google has Checkout. eBay is a big advertiser on Google AdWords. eBay lists its products in Google Product Search driving traffic back to eBay. Yahoo Publisher Network ads and graphical advertising now appear on eBay, while Shopping.com, an eBay company, derives a ton of revenue from Google AdSense ads. PayPal is promoted to Yahoo! Merchants while Google Base doesn’t allow merchants to list PayPal as a payment option. With Google the search engine of choice for the majority of searchers and eBay a behemoth in the online shopping space, it’s obvious that these guys have to sometimes play nice with each other.
But the Google party protesting the ban of Google Checkout on eBay as a payment option doesn’t seem to be going over well with the execs at eBay. I got a tip saying that eBay had pulled all its ads from Google AdWords as of late last night. While I have no official confirmation, I couldn’t find one eBay ad live on AdWords, and AdWords is usually littered with them. Ads for eBay companies like Shopping.com and PayPal are still live on AdWords, but there isn’t even an eBay ad up for keywords like ‘ebay’ or ‘auction’ on Google AdWords.
My first thought was that this is as bad for Google as it is for eBay, but I’m starting to think otherwise. I believe that Google’s AdWords revenue is diversified enough to handle a loss of an advertiser like eBay. I don’t have data to back that up, but I don’t recall seeing statements in Google’s filings highlighting eBay as a significant proportion of its AdWords revenue. At the same time, according to a year old ‘term paper’ by Julien Decot and Steve Lee’s of the Haas School of Business (published on John Battelle’s blog):
Since Google has become such a valuable source of traffic for eBay, one of the kargest web sites, it stands to reason eBay is one of Google’s largest customers. eBay spent $1,230 million on sales & marketing in 2005. Fifty-three percent of eBay’s 2004 sales & marketing budget was spent on advertising with 62% allocated to online advertising. This is consistent with a leading analyst’s conclusion.Therefore, we estimate eBay spent approximately $400 million in online advertising in 2005, a figure consistent with a recent Wall Street Journal article. Given Google represents half of total online advertising revenues, it is reasonable to assume Google represents half of eBay’s online marketing spend, or $200 million. This corresponds to 3% of Google’s 2005 revenues. A conclusion is that eBay is more dependent on Google because a substantially higher percentage of their revenue, estimated at 12%, is dependent on Google versus an estimated 3% of Google’s revenues dependent on eBay.
As for how this relates to the shopping comparison engine world, while I don’t expect this tiff to continue as eBay would…well…die…Shopping.com would be hit hard as it gets a ton of traffic from Google AdWords as well as a ton of revenue from Google AdSense through crappy AdWords landing pages like these:
Furthermore, the other shopping engines would benefit by not having to compete with the ultra-aggressive eBay or Shopping.com on Google AdWords which usually bid on every keyword possible.
My prediction? eBay is back up on AdWords by tomorrow. Hope I’m wrong, though. THAT would be a great story.