Google, EBay Partner on Ads, Calling Tool

Google Inc. said yesterday that it has formed a multiyear deal with eBay Inc. to provide text ads for the online auction giant outside the United States. The firms also agreed to enhance "click to call" functions on each other's Web sites, which would allow customers to use the Internet to instantly talk to an advertiser or merchant.

The deal could provide a boost for eBay, which reported slower revenue growth earlier this year and recently underwent some management changes. Having Google ads on its Web pages overseas will diversify eBay's revenue stream by providing more advertising dollars, analysts said. EBay struck a similar deal earlier this year with Yahoo Inc. to provide ads for its U.S. audience.

Internet companies are increasingly trying to boost their online presence through deals with firms that also serve as competitors in other areas. EBay competes with Yahoo in online auctions in Asia, for instance. And Google recently launched its own online retail payment product, Google Checkout, which many analysts expect to compete with eBay's PayPal.

Financial terms of yesterday's partnership were not disclosed, but the firms said they will share some ad revenue. EBay said the deal would not impact its financial results this year or next.

"We felt that combining our strengths in e-commerce and online communications, we could also do some things that would be beneficial to our buyers and sellers and [Google's] merchants and advertisers," said eBay spokesman Hani Durzy. "There are certain areas where the two companies will sometimes overlap, but we keep an eye on them and we haven't seen an impact on any of our products that might be in the same area."

The agreement could benefit both companies: Google expands its advertising presence to a new audience of eBay customers, half of whom are overseas, and eBay gains more exposure for Skype, a company it purchased last year for $2.6 billion that enables customers to make inexpensive phone calls using the Internet.

The deal calls for eBay and Google customers to use Skype or Google Talk for click-to-call communication with an advertiser or customer. The firms said they had not worked out the specifics of the feature but would begin testing how it would work next year.

The click-to-call feature would allow online advertisers to encourage visitors to click on a link to call a business. Once clicked, a box appears and asks the visitor to enter a phone number. Within seconds, the consumer's phone will ring and simultaneously ring the business, connecting the two. Companies that offer the service charge advertisers $8 to $15 a call, according to industry figures.

Click-to-call aims to solve a problem with online shopping: If customers are interested in a product but have a question, it can be time-consuming and difficult to get in touch with the business offline. Most businesses offer a toll-free customer service number on their Web site, but that can be slow and cumbersome, said John Federman, chief executive of eStara Inc., a Reston firm that provides click-to-call technology for Amazon.com, among others.

"If you can talk to someone live when you're in the moment of looking for a product or service, the likelihood you'll buy is much higher," Federman said.

So far, a small number of U.S. consumers are familiar with click-to-call features, but Internet companies are quickly adding the feature to connect online customers for free with retailers, either to ask questions or place an order over the phone.

A report by market research firm Kelsey Group Inc. estimates that the pay-per-call industry will grow to at least $1.4 billion but could grow as high as $4 billion by 2009. An analyst for the firm said the feature provides advertisers with a clear way of measuring results from their advertising dollars, which had been more difficult and expensive to measure.

"In the long run, you take Google and eBay, and you have a complete picture of people's buying behavior," said Matthew Booth, Kelsey Group's vice president and program director of interactive local media. "That's the strategic picture of where this is heading."

EBay's Durzy said the firm hopes click-to-call communication will open both firms to a new category of potential advertisers not currently served by eBay's auction or fixed-price sales model, such as real estate agents and auto dealerships looking for sales leads. Durzy said click-to-call advertising would be a way to generate sales leads through the Internet, "which would open up the usefulness of the Internet to a whole new group of merchants and advertisers."

The deal has some advantages for eBay "in terms of monetizing its international market through the advertising that Google will serve up," said Jennifer Simpson, an analyst at Yankee Group. "EBay has been looking for a way to make Skype a more monetizeable business. This is a potential way it can use the advantageous nature of its online voice-over-Internet entity to drive a bit more revenue."