eBay Ends AOL Ad Sales Deal

  |  April 1, 2003   |  Comments

Although some friction is reported between the companies, the money is increasingly less significant to eBay; meanwhile prosecutors are after PayPal's gambling transaction revenues. AOL, Infinity in Content-Swap Promo

As eBay's income from auction sales has grown at near-geometric rates, advertising revenues became less a part of the mix, which helps to explain why the auction giant is letting an ad sales deal with America Online expire. But a little friction may also be involved.

Also, eBay has disclosed that its PayPal operating subsidiary is facing a claim by the U.S. Attorney for the Eastern District of Missouri that the payment service operation allegedly violated part of the USA Patriot Act by transmitting payments related to gambling.

San Jose, Calif.-based eBay said in its annual 10-K filing with the Securities and Exchange Commission that its ad sales representative agreement with AOL "has not been extended or renewed" and in fact terminated on Monday.

eBay cited "a general deterioration in the online advertising market that adversely impacted our advertising sales through AOL." The company also said its AOL deal will continue for a specified wind-down period but that as of today, its third-party advertising revenues "will be dependent on the efforts of its existing internal sales staff.

"We continue to view our business as primarily transaction driven and we expect third-party advertising net revenues in future periods to continue to decrease as a percentage of total net revenues and in absolute dollars," eBay said in its 10-K filing.

eBay's revenue from third-party advertising sales dropped from $80.5 million in 2001 to $54.9 million in 2002.

However, the Wall Street Journal, quoting an unnamed source said to be familiar with eBay's dealings with AOL, reported that the auction company has found it increasingly difficult to deal with AOL Time Warner, which has been seeking to bolster its lagging America Online unit.

The source was quoted as saying that AOL has been unclear about its plans for a fixed-price marketplace on the service.

eBay, in the process of integrating its Half.com unit, is also in the fixed-price arena and for some time has been pushing the "buy it now" fixed-price feature even in its regular auction listings.

Meanwhile, on the PayPal matter, eBay said in its filing that PayPal might have to forfeit money it has received from gambling site transactions, and it also might be subject to criminal liability.

PayPal exited the business of processing payments for online gambling in November of last year after it was acquired by eBay, and eBay said that only about 6 percent of PayPal's revenues in 2002 were derived from gambling-related transactions.

The federal prosecutor in Missouri sent eBay a letter offering "a complete settlement of all possible claims and charges if PayPal paid the purported amount of its earnings derived from online gambling merchants during the nine-month period from October 26, 2001 to July 31, 2002, plus interest.

eBay, which said it believes that PayPal did not violate the law, stated in its annual report that "although the outcome of this matter is not yet determinable, the monetary amounts are not expected to have a material impact on our financial position, results of operations or cash flows."

Also surfacing in the SEC report was the news that trial is scheduled for next month in a complicated patent infringement lawsuit filed against eBay by MercExchange LLC.

ClickZ Live Toronto On the heels of a fantastic event in New York City, ClickZ Live is taking the fun and learning to Toronto, June 23-25. With over 15 years' experience delivering industry-leading events, ClickZ Live offers an action-packed, educationally-focused agenda covering all aspects of digital marketing. Register today!

ClickZ Live San Francisco Want to learn more? Join us at ClickZ Live San Francisco, Aug 10-12!
Educating marketers for over 15 years, ClickZ Live brings together industry thought leaders from the largest brands and agencies to deliver the most advanced, educational digital marketing agenda. Register today and save $500!

ABOUT THE AUTHOR

COMMENTSCommenting policy

comments powered by Disqus

ClickZ Today is our #1 newsletter.
Get a daily dose of digital marketing.

COMMENTS

UPCOMING EVENTS

UPCOMING TRAINING

Featured White Papers

Gartner Magic Quadrant for Digital Commerce

Gartner Magic Quadrant for Digital Commerce
This Magic Quadrant examines leading digital commerce platforms that enable organizations to build digital commerce sites. These commerce platforms facilitate purchasing transactions over the Web, and support the creation and continuing development of an online relationship with a consumer.

Paid Search in the Mobile Era

Paid Search in the Mobile Era
Google reports that paid search ads are currently driving 40+ million calls per month. Cost per click is increasing, paid search budgets are growing, and mobile continues to dominate. It's time to revamp old search strategies, reimagine stale best practices, and add new layers data to your analytics.

Resources

Jobs

    • Copywriting & SEO Specialist
      Copywriting & SEO Specialist (HeBS Digital) - NEW YORKJOB DESCRIPTION     JOB TITLE:         ...
    • SEO Specialist
      SEO Specialist (NJM Insurance Group) - West TrentonNew Jersey Manufacturers Insurance Company is an industry leader among its peers and the largest...
    • Paid Search / Search Engine Marketing (SEM, PPC) Specialist
      Paid Search / Search Engine Marketing (SEM, PPC) Specialist (HeBS Digital) - New York  JOB TITLE:        ...