eBay Calls on Google

Updated from 7:20 a.m.

eBay ( EBAY) set a partnership with Google ( GOOG) to sell text-based ads internationally.

The companies said "certain components of the deal involve revenue sharing," but terms weren't otherwise disclosed. The agreement also includes a so-called click-to-call advertising deal using eBay's Skype and Google Talk.

"We're pleased to expand our long-standing relationship with Google to explore new market opportunities, like click-to-call advertising, that benefit both our communities of users," said eBay chief Meg Whitman. "People continue to evolve how they shop, communicate and advertise online. By combining the power of eBay in ecommerce and Skype in communications with Google's leadership in search and advertising, we can increase the usefulness of the Internet for shoppers, merchants and advertisers around the world."

"This agreement underscores how much we value eBay as a partner," said Eric Schmidt, CEO of Google. "Our technologies will allow us to connect users to relevant advertising across eBay's international properties. By working together to promote click-to-call functionality through Google Talk and Skype, we are offering advertisers another innovative way to connect with customers."

The companies plan to begin testing the text-based advertising and click-to-call initiatives in early 2007 that will be evaluated over a period of several months. The specific components and timing of implementation will depend upon initial test results, and will vary by market, largely driven by local dynamics and joint capabilities.

"This announcement continues to show, in our opinion, that Google continues to grow not only through rapid innovation and product introduction, but also through creative partnerships with some of the most trafficked properties on the Internet,'' writes Oppenheimer & Co. analyst Sasa Zorovich, in a note to clients. Zorovich, who reiterated his buy rating on Google's shares and his $540 price target, doesn't expect the agreement to have a material impact on Google's bottom line either this year or next year.

The deal comes as eBay struggles to show investors it can find new growth opportunities as its core auction business begins to slow. Shares are off 40% this year following a series of earnings disappointments. This spring, eBay signed a deal covering domestic ads with Yahoo! ( YHOO).

Meanwhile, Google has also signed a series of deals with partners ranging from Dell ( DELL) to Adobe ( ADBE) in a bid to make its software toolbar even more ubiquitous.

eBay said it doesn't expect the deal to affect its financials for the next two years.

Google also took another shot at Microsoft ( MSFT) with Google Aps for Domains, a feature that offers companies and other organizations free services such as email, IM and calendar.

This is just another example of how Google is trying to better Microsoft just as the world's largest software company is trying to gain a bigger foothold in search.

``This is a bold move by Google. They are striking hard at a nearly $12 billion/year Microsoft revenue stream. And they are clearly trying to get this out the door fast, in anticipation of Microsoft Office 2007, which will include collaboration features for businesses,'' writes Michael Arrington, on the blog TechCruch.

Investors who are growing increasingly worried about the economy will want to see payoffs a lot quicker if they are going to bid up Google's shares, which have slumped 9% this year.

Shares of Google rose $2.93 to $376.19, while eBay rose 70 cents to $26.

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