eBay Flexes Brand Muscle - TheStreet

eBay Flexes Brand Muscle

The online auctioneer isn't ready to cede the Internet to Google.
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With friends like

Google

(GOOG) - Get Report

, who needs enemies?

While the ubiquitous search giant and

eBay

(EBAY) - Get Report

often hail their "partnership" -- after all, eBay is one of the biggest buyers of ads on Google's network -- Google has steadily marched onto eBay's turf by expanding efforts in the e-commerce space.

Google offers Base, a service that lets users list items for sale, and has been aggressively promoting its Checkout payment service. But PayPal has continued to thrive despite Google's advance -- and in stark contrast to predictions of its demise when Checkout debuted last summer.

Not only does Checkout compete with eBay's PayPal service, but combined with Google's increasingly tight grip on the way searches are launched on the Web, it has the potential to route users completely around eBay and straight into the arms of merchants selling goods.

Just last week, Google extended yet another round of offers to entice users to Checkout by offering rebates to Valentine's Day shoppers.

The latest carrot comes on the heels of

aggressive Checkout promotions during the fourth quarter that totaled about $30 million, or 1% of Google's revenue, over the same period.

However, events last week demonstrate that eBay's position may be far more defendable than critics believe, thanks to the meticulous focus on quality and brand-building that the company has embarked on under CEO Meg Whitman.

Whitman, who started her career at brand powerhouse

Procter & Gamble

(PG) - Get Report

, is a big believer in the value of brands in the consumer space.

Over the course of last year, when critics argued that eBay was a relic of a past generation of Internet companies -- an argument that contributed to hurting the company's stock by one-third over that period -- Whitman constantly pointed to eBay's ownership of three top Internet brands (eBay, PayPal and Skype) as key strengths.

Now, Whitman's proclamations may be manifesting themselves in new, unexpected ways, showing that eBay has the potential to play a central role in even the most cutting-edge corners of the Internet.

The Wall Street Journal

reported last week that eBay was in talks with

News Corp.'s

(NWS) - Get Report

MySpace division, the hugely popular social networking site. The companies are pursuing a deal that would let MySpace's community of users buy and sell things from each other using eBay's e-commerce platform and PayPal payment system.

In fact, MySpace is so intent on getting into the e-commerce business that it's now having second thoughts about finalizing an original ad-sharing agreement with Google. "Before it signs a longer document finalizing the agreement, MySpace wants to ensure that the terms originally agreed on -- as outlined in a hastily drafted deal letter of intent in August -- don't limit its ability to work with third parties such as eBay," the

Journal

reported, attributing it to people familiar with the discussions.

But in theory, MySpace doesn't need to look elsewhere to move further into e-commerce, because Google itself is looking for ways to boost its participation in that business. And MySpace's young user base -- always up for new, quicker ways of conducting affairs on the Web -- could make an ideal audience for Google's service.

In fact, that was seen as the logical next step when the partnership was announced. "Now that a search deal is in place, e-commerce could come next for MySpace," eMarketer Senior Analyst Debra Williamson said last August. And given that Google has not been shy about how focused it is on getting into e-commerce, MySpace could likely negotiate a generous setup as well.

MySpace's feelers to eBay imply a testament to how much more highly regarded eBay's capabilities are over Google's -- and can expected to be in the near future by a company as forward looking as MySpace -- when it comes to e-commerce and payments. The move makes sense because MySpace, while an innovative up-and-comer, is still in the process of building its own brand and also faces competition from a quickly swelling pool of knockoffs emboldened by its success.

Bringing eBay and PayPal -- the best brands in their businesses -- to its users would be a feather in MySpace's hat. Google, while hardly a shabby brand, has its strength concentrated in its search products, with the rest of its 80-odd products having to fight for scraps.

eBay's focus on brand-building isn't just unfounded marketing spin. The perceived quality of eBay's hallmark marketplace site among buyers and sellers determines how successful it is, and is itself based on the actual experience of millions of users who have come before. A recent survey by JPMorgan showed that not only is PayPal much better known than Google Checkout, it also ranks much higher on user satisfaction.

Perhaps the biggest compliment to how eBay manages its franchises comes from none other than Google. In putting together Google Pack, a starter kit that Google assembles by pulling together what it sees as the essentials of the Internet, the search giant's own team chose to include Skype. That's in spite of Google having a rival offering called Google Talk.

"I think it is actually a testament to Skype that the internal team who makes the decisions about Google Pack thought Skype was deserving about being in this basket of items that you kind of need when you start on the Web," Whitman said during the company's last conference call. "So we were excited by that and appreciate their doing that."

Whitman, who made the gracious comments at a time when eBay was likely vying to win favor with Google partner MySpace, may well subscribe to another well-known adage: Keep your friends close, but your enemies closer.