Yahoo, EBay Join Forces in Partnership

In this Oct. 18, 2005, file photo, an exterior view of Yahoo Inc. headquarters in Sunnyvale, Calif., is shown. (AP Photo/Paul Sakuma) (Paul Sakuma - AP)

SAN FRANCISCO -- Internet powerhouses Yahoo and eBay are joining forces in an alliance that further defines the battle lines in an online brawl with rivals Google, Microsoft and AOL.

Under the multiyear partnership announced Thursday, Yahoo and eBay will draw upon each other's strengths in online advertising, payments and communications so they can connect with even more Web surfers than they already do.

Shares of both companies jumped on the news, reflecting investor expectations that the deal will open up even more moneymaking opportunities for two of the Internet's oldest and most successful businesses.

Sunnyvale, Calif.-based Yahoo Inc. operates the world's most trafficked Web site with 402 million unique users and ranks second in the lucrative search advertising market behind Google. It earned $1.9 billion on revenue of $5.3 billion last year, primarily through online ads.

San Jose, Calif.-based eBay Inc. is the e-commerce leader, with nearly 200 million users of online auctions and another 73 million U.S. accountholders of its payment service, PayPal. It earned $1.1 billion on revenue of $4.6 billion last year, mostly by taking a slice of the auction sales on its site.

Nearly 113 million people in the United States visited Yahoo or eBay or both destinations in April, according to Nielsen/NetRatings Inc.

Thursday's announcement followed several weeks of rampant Wall Street speculation about the mating dance among the Internet's heavyweights. At one point, there was even talk that Microsoft Corp. wanted to buy Yahoo.

Although it's not expected to have a financial impact until next year, the deal between Yahoo and eBay seems likely to shake up the competitive landscape.

Coupled with Google Inc.'s recent $1 billion investment in Time Warner Inc.'s AOL, the Yahoo-eBay partnership also figures to intensify the pressure on Microsoft to find an ally as it tries to become a more formidable player in Internet advertising.

Industry analysts on Thursday identified Amazon.com Inc., the Internet's top retailer, and MySpace.com, an increasingly popular teen hangout owned by News Corp., as the most logical candidates for a Microsoft alliance.

Unlike the Google-AOL deal, Yahoo and eBay aren't swapping any money. Instead, they are pooling together their resources in an effort to boost their revenue beginning next year _ a prospect that provided a lift to their recently slumping stocks.

EBay shares surged $3.68, or 12 percent, to close at $33.88 on the Nasdaq Stock Market, where Yahoo's shares rose $1.13, or 3.6 percent, to finish at $32.92.