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Yahoo-eBay deal a Google buster?

By Elinor Mills and Margaret Kane
Staff Writer, CNET

Published: May 25, 2006, 2:19 PM PDT

SANTA CLARA, Calif.--Yahoo and eBay are gunning for Google, whether they'll admit to it or not. 

The two companies unveiled a partnership Thursday morning that could bring more advertising revenue to Yahoo, whose market share losses to Google brought angry words from shareholders at the portal giant's annual stockholder meeting later in the day.

eBay approached Yahoo to discuss working together more closely on advertising, said Yahoo Chief Executive Terry Semel. But the multiyear partnership centered on advertising, e-commerce and search will benefit both companies, he told CNET following the shareholder meeting .

"The deal offers great opportunities for both companies to share great assets with each other," Semel said. "It's all about creating more value and a better experience for users as well as for advertisers."

Neither Yahoo executives nor shareholders mentioned the deal at the meeting, but several shareholders complained that Yahoo hasn't done enough to compete.

"It seems like you're being outsmarted by a couple of Stanford dropouts at Google," Edward Abramczyk said in addressing Yahoo's management.

"Google's business has boomed. We lost billions of dollars in revenue to Google and others," said another shareholder.

Semel reminded shareholders that although search advertising is the leading way to make money, Yahoo is ahead of its rivals in providing services, such as e-mail, instant messaging, news and music, which people spend more time using.

"We think the Internet is still in the very early days," he said. "We have a leadership position in a number of the most heavily used things on the Internet."

As previously reported, under the deal with eBay, Yahoo will become the exclusive third-party provider of all graphical ads on eBay and will also provide new text ads on some search results pages. Yahoo search and site links will be integrated into a co-branded version of the eBay toolbar.

Meanwhile, eBay's PayPal service will be the online payment method used by Yahoo customers, merchants and publishers and will be integrated into product offerings. The two companies will also explore co-developing their respective voice over Internet Protocol (VoIP) services. That project will look at releasing "click-to-call" ad technologies on their Web sites, using both Yahoo Messenger with Voice and eBay's Skype service.

"It's a unique partnership. It's the first time we've gone off (our) network with graphical ads" said Yahoo Chief Operating Officer Dan Rosensweig. eBay is a "huge, fertile, relevant environment" for advertisers.

Specific financial details were not released, but both companies said the deal would not be material to 2006 results and that any financial impact for 2007 and beyond would be detailed when the companies issue their outlooks for those periods. 

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