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Yahoo and eBay team up

May 27th, 2006

Yahoo! Inc. and eBay Inc. forged an alliance to challenge Google Inc.’s grip on the Internet.

Under the accord, eBay, the world’s largest Internet auctioneer, will use Yahoo! software exclusively to post ads on its Web site, the companies said Thursday. Yahoo!, which trails Google in online search and advertising, will in return exclusively use eBay’s PayPal payment system.

The agreement marks a shift for eBay, which so far has failed to capitalize on the surge in Internet advertising. Yahoo! will gain revenue from the ads as well as access to the auctioneer’s 75 million users. Both companies are seeking to head off Google, which is directly targeting eBay by expanding into classified ads and online payments.

“They are getting together and partnering against a common enemy,” said Sasa Zorovic, an analyst at Oppenheimer & Co. in Boston. He rates Yahoo! “neutral” and said he doesn’t own it.

The companies didn’t elaborate on the financial details of the agreement, which is scheduled to take effect in the United States next year. The deal won’t affect profit this year.

“They both realize that in the long term they need to combine their most valuable assets,” said Tim Boyd, an analyst for Caris & Co. in New York, who rates eBay “above average,” Yahoo! “average” and Google “buy.”

Yahoo! will become the exclusive provider of banner and search ads on eBay’s Web site, enabling eBay to tap the $26 billion Internet advertising market.


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