EBay pulls ads from Google's U.S. ad network

IDG News Service - EBay Inc. has pulled all of its paid search ads from Google Inc.'s AdWords network in the U.S., an eyebrow-raising move likely to be seen in the industry as a sign of deteriorating relations between the two Internet giants.

However, eBay kept its AdWords campaigns going outside of the U.S., eBay spokesman Hani Durzy said today.

Durzy characterized the decision to pull the U.S. Google ads as an instance in a continued experiment eBay does to determine the best allocation of its advertising and marketing budget.

However, a source familiar with the situation said the move is an angry reaction by eBay's management to Google's decision to hold a protest party concurrent with the start of eBay Live, the company's annual conference for merchants. Google has been reaching out to media to promote the party, aimed at eBay merchants who are upset that eBay doesn't allow them to use Google's Checkout online transaction system.

EBay Live begins tomorrow evening in Boston, which is the same time and place Google has chosen for its protest party.

This person also said the situation is fast-developing and fluid, with high-ranking eBay executives holding meetings right now to discuss the extent of the decision.

EBay has said that Checkout, introduced about a year ago, doesn't have enough of a track record yet, while Google argues that eBay is just trying to protect its own PayPal online payment system.

Durzy said the decision to "reallocate" the Google ad budget elsewhere isn't tied to the Checkout protest party, but he acknowledged that the Google event hasn't gone down well inside of eBay.

"This is a regular thing we do across the different channels we use for marketing, but, having said that, we are disappointed that Google has chosen this time to detract from our annual event that gives online sellers a chance to learn how to grow their business in eBay and in other channels," Durzy said. "It's not the kind of activity one partner normally does with another."

Relations between eBay and Google have been strained in recent years, as Google has morphed from a partner into a partial competitor with new products like Checkout and its Google Base listings service.

In May 2006, eBay and Yahoo Inc. struck a wide-ranging partnership that, among other things, made Yahoo the exclusive provider of search and display ads within U.S. eBay sites.

Although Google performs a similar function for eBay sites outside of the U.S., the eBay-Yahoo tie up was seen as a defensive move by eBay and Yahoo against Google.

EBay doesn't have a timetable for when it might reinstate its paid search ads in Google's U.S. AdWords system, Durzy said. "We need time to evaluate the impact" of the pullout, he said. "We don't have a time for when we might turn them back on."

EBay pulled the ads "a couple of days ago," he said. "We're in the midst of an experiment, and we'll see how it goes."