With friends like
, who needs enemies?
announced that it would pull its advertising from Google as part of an experiment to gauge the effectiveness of its marketing dollars.
However, that decision came on the heels of an underhanded move by Google to poach eBay users. And nobody believes the timing of eBay's "experiment" was mere coincidence.
But while the fireworks between the two companies may steal the show, investors can glean some valuable lessons from the exchange. Google's move suggests a sign of desperation to push its struggling Checkout online-payment service. And for all the lip service Google has been giving to the importance of partnerships, the company can be unusually abrasive when push comes to shove.
Here's what happened:
eBay, the largest buyer of ads on Google and the one publicly pointed to as a key partner, was set to host an event in Boston for its users on Thursday night. Google decided to throw its own party on the same day, with invitations specifically aimed at eBay users.
"Are you an online seller attending eBay Live! in Boston this week?" Google wrote on its blog. "If so, join us for a celebration of user choice at the Google Checkout Freedom Party on Thursday night."
Want more? Check out TheStreet.com TV video.Vishesh takes a closer look at the ramifications for Google.
At that point, eBay announced it was pulling its ads from Google to test marketing effectiveness. A more apt description was given by American Technology Research analyst Tim Boyd in a Thursday note: "eBay dumped all of its U.S. AdWords bids into the Boston Harbor in response to a 'Google Checkout protest party' at eBay Live in Boston."
After eBay pulled its ad dollars from Google, the search giant suddenly decided to cancel its party. "eBay Live attendees have plenty of activities to keep them busy this week in Boston, and we did not want to detract from that activity," the company commented coyly in a follow-up blog entry.
Shares of eBay were recently up 28 cents to $31.76; Google was off $2.57, or 0.5%, to $502.67.
But Google's ploy smacks of desperation. The company has been promoting its high-profile Checkout service, which debuted in 2006, with aggressive discounts and promotions.
But despite the enticements, Checkout continues to get trounced by eBay's much older and more established PayPal service.
In March, PayPal processed 68 times as many transactions as Google Checkout, which garnered only a 1% market share, according to research firm Compete. That's despite an estimated $60 million Google has spent to push Checkout.
"For all its marketing muscle, Google has yet to make a compelling case to consumers as to why Checkout is even needed," Compete wrote on its blog. "Without a strong consumer valuation proposition, Checkout has been unable to make any headway against PayPal."
In a May interview, a Google Checkout product manager declined to comment on Compete's estimates, saying it was against company policy to address third-party figures. Checkout continues to maintain its conspicuously vague party line that it has signed up "thousands" of merchants for the service.
But beyond Checkout, the move is also revealing about Google's broader thinking and corroborates the growing number of claims about the search giant's hardball tactics. And that's despite the fact that Google has been increasingly vocal about the importance it allegedly places on partnerships.
"I'm very excited to talk to you today and to echo a lot of the sentiments that
Google CEO Eric Schmidt already shared with you how key partnerships are to Google and how much we care about making our partners successful," Google co-founder and President of Technology Sergey Brin told investors in a conference call after Google's first-quarter earnings.
But Brin's view of teamwork would come as a surprise to a company like
. The media giant tried to partner with Google several times over the placing of content on Google's YouTube site, but finally walked out on negotiations when it felt that Google wasn't willing to acknowledge the value of its content and split revenue accordingly.
And Google's obtuse ways are not just a matter of manners, either. Its truculence has been seized on by rivals who have used Google's behavior to form partnerships with companies jilted by Google.
No one has benefited more from this than
. Earlier this year, the Web giant partnered with eBay to extend the PayPal platform. It also has banded with a consortium of media companies to distribute video content on the Web. And many of the search dollars pulled by eBay could land in the lap of Yahoo!, the second-most popular search engine.
Start-ups such as
, which reached an agreement to distribute Viacom content, also have benefited. Even
has said that it stands out from Google in its respect for other companies.
This latest spat, while rich in drama, highlights much deeper underlying tensions.