Yahoo, eBay Strike Multi-faceted Deal

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Yahoo and eBay have teamed up to extend each other's reach, with deals in search, graphical advertising and "click-to-call" functionality, as well as online payments and a co-branded toolbar.

Under the agreement, Yahoo will become the exclusive third-party provider of all graphical advertisements throughout the eBay.com site. EBay will also show Yahoo's paid search results on some eBay.com search results pages in the U.S. In addition, Yahoo and eBay will work together to make more up-to-date eBay product listings show up in Yahoo search results.

The two companies will begin developing click-to-call advertising on their U.S. sites, using both Yahoo Messenger with Voice and eBay's Skype service. Click-to-call ads, which have been tested by Google and others, let users click on a link in an ad to directly call the advertiser from their computers.

"Yahoo holds a leadership position in all forms of online advertising. This partnership with eBay provides us with a great opportunity to further extend our sponsored search and graphical advertising reach to one of the largest and most active communities on the Web," Terry Semel, chairman and CEO of Yahoo, said in a statement.

Other elements of the deal include Yahoo naming eBay's PayPal as the exclusive third-party provider of its online wallet. PayPal will be integrated into Yahoo's sites, with prominent positioning as a payment option for consumers, merchants and publishers. That includes the Yahoo Publisher Network, Yahoo Search Marketing, Yahoo Merchant Solutions and other small business services.

"Yahoo offers an engaged online audience, which drives massive traffic through its rich consumer content and premium services. Working together, we can create more exposure for our properties, which in turn makes them more valuable to our users," said Meg Whitman, president and CEO of eBay.

In addition, eBay's toolbar will add Yahoo branding, with integrated Yahoo network links and search box.

Yahoo and eBay will begin rolling out these initiatives this year, starting with a testing phase over the next several months, with full implementation expected in 2007.