eBay and Google: Will one of them cave in? Who?

Posted Jun 22nd 2007 8:20AM by Melly Alazraki
Filed under: Industry, Consumer Experience, Competitive Strategy, Google (GOOG), eBay (EBAY)

Last week, eBay Inc. (NASDAQ: EBAY) pulled out its AdWords from Google Inc. (NASDAQ: GOOG). A week later, it's still not clear who was hit harder by the move, Google or eBay. Now it's time to try and examine the impact of this move on both companies. It is difficult to come up with exact, accurate data as, of course, both companies keep such metrics to themselves. I'll at least try to put the little we know/estimate in context.

First Google. It has been suggested that eBay is the single largest buyer of AdWords. What does it mean? According to some analysts, eBay spends $25 million a quarter on advertising on Google. It may not sound much when compared to Google's overall revenue ($3.7 billion in latest quarter), but it does hurt, and also sets a dangerous precedent for other advertisers.

Now eBay, which is a little more tricky:

Bill Tancer of Hitwise says that "Google is the #1 source of traffic for ebay.com, accounting for 10.6% of its traffic for Tuesday 6/7/07." This percentage dropped nearly 7% to 9.86% on Tuesday 6/12/07. He thinks the reason the drop wasn't more pronounced is because eBay still gets a large amount of traffic from Google search terms.

Scot Wingo of eBay Strategies compiled several estimates to reach his own. The most interesting by far is his survey of top sellers: "10% of our top-sellers (100/1000) that they saw a material 20%+ drop in sales the day eBay stopped buying AdWords last week." However, these tend to be concentrated around specific businesses (such as fixed price, practical sales), while others, like consumer-electronic or auction-based businesses, did well in the week and did not see an impact. Still, those sellers who saw a drop in traffic and sales "pulled back HARD on listings."

Yes, some thought eBay should have stood up to Google months ago, but the move may hurt eBay far more than Goggle. Perhaps this move is one or two years too late to really hurt Google, but I guess there was no reason to do it back then. Right now, I'm afraid, my bet is on Google. eBay made a bad move that may just end up further alienating its sellers.

Tags: bill tancer, BillTancer, checkout, ebay, goog, google, google checkout, GoogleCheckout, paypal, scot wingo, ScotWingo

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Reader Comments (Page 1 of 1)

6-22-2007 @ 11:32AM

firemeg said...

This will likely have little effect on either company. Sellers on eBay however may feel a slight jab.

eBay still us using (and paying for) Google Adwords internationally, so it wasn't really a $25 million loss to google, especially if this is only a week long trial as eBay has stated.

eBay (and therefore Google) is still getting revenue from Google Adsense on Stumbleupon, the newly acquired eBay site.

eBay just released the beta version of the new eBay China site, and on the homepage there is a big ole' Google logo.

Basically, eBay ran up to the schoolyard bully (in their eyes) and threw a little stone at him and then ran away. The bully could at any moment decimate eBay, but is choosing not to do so.