The Google-eBay Spat and What It Means to You
Google fired the first shot by attempting to crash eBay's party.
By Michael Stillman
It was a spat that caught most internet observers off guard, a battle between "do no evil" search giant Google and massive online commerce site eBay. Surprisingly, it was the gentle giant, Google, which instigated this unexpected confrontation. However, it was eBay which responded quickly, like a trapped rattlesnake, striking back at the giant with no hint of fear. The result was Google backed down, attempting to slide off the incident as a joke. It was not, and eBay was not about to give Google a pass.
The incident arose last month in Boston, where 9,000 eBayers, primarily sellers, gathered for "eBay Live," an event the auction site held for its customers. Google attempted to crash eBay's party with its own smaller, "Let Freedom Ring" event. That was meant to be a humorous way of promoting its rival payment service to eBay sellers. No one would dispute Google's right to offer a competing service, but throwing a party designed specifically to feed off of the traffic eBay brought to Boston is pushing the boundaries of proper behavior. eBay was not amused.
eBay may be primarily an auction site, and Google a search engine, but each has a division competing in the lucrative payment-processing field. For eBay, it is market leader PayPal. PayPal, once an independent company built primarily to service payments on eBay, was bought out by that site a few years ago. Today, it brings in tons of money for eBay, reportedly some $1.4 billion in revenue last year. PayPal, of course, no longer serves just eBay, but provides payment processing for many sites, maybe even your own if you sell online. A natural outgrowth of eBay's primary business, it is now a hugely successful business of its own.
eBay is not the only firm which sees payment processing as a logical outgrowth of its core business. Google sends countless customers to many online selling sites. If the customer is sent via an advertisement, they make a few bucks, but if the customer arrives from an internet match, Google gets nothing. At some point, Google looked at that situation and concluded there must be a way to get a piece of the action. Since many of those merchants needed a way to provide secure online payment (which is why so many are using PayPal), Google figured this was a logical way to monetize the free service they were providing. So, along came Google Checkout, the search giant's answer to PayPal.
Now Google would like eBay to accept payments through Google Checkout too, hence the "Let Freedom Ring" moniker. "Freedom," of course, has a nice ring to it, but to eBay, this is like giving the fox freedom to roam the henhouse. Or perhaps it's like giving Target the "freedom" to install a kiosk inside of Wal-Mart. To eBay, this was simply an attempt to secure the freedom to steal their business.
The Google-eBay Spat and What It Means to You
eBay returned the fire by pulling all its ads off of Google.
The auction seller struck back forcefully. They immediately pulled all of their advertisements from Google. eBay runs numerous "adwords" advertisements that show up when users conduct a search on Google. They lead to items being offered for sale on eBay auctions. The exact amount is not publicly known, but it is reported that eBay's expenditures with Google are in the tens if not hundreds of millions of dollars. This is not an amount which will break Google, but it is enough to get their attention. Google immediately backed down, calling off their planned event. Freedom may ring, but money talks. Besides which, Google was portrayed as the aggressor in this incident, attempting to steal customers from eBay at eBay's own conference. To a company that built itself from upstart to dominant force in search on a "do no evil" model, their action looked anything but nice. They attempted to portray the whole thing as a joke, but eBay did not see it that way, nor did many observers. Instead, they saw this as an out of character giant step over the line by Google. Google's backing down can be seen as an attempt to quickly restore its reputation.
On its Google Checkout Blog, a Google blogger explained, "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. After speaking with officials at eBay, we at Google agreed that it was better for us not to feature this event during the eBay Live conference." In other words, never mind. eBay 1, Google 0. To appear unruffled, eBay responded that it already planned to test other vehicles when it pulled its Google budget and replaced it with advertising on Yahoo and MSN. Perhaps, but not like this.
What does all of this mean to the small businessperson, say a bookseller? Probably nothing new, but it does reinforce one of the most basic rules of business. Your business relationships need to work for you, and you cannot depend on anyone else to look out for your interests. Relationships work only if they are mutually beneficial. Those who sell on eBay will not be surprised by their sharp response, though their willingness to take on the likes of Google must be a first. eBay has always been willing to make changes it felt were in its own best interests, even if their sellers did not feel they equally suited their own. If eBay is not afraid of Google, they are not afraid of you. Threats to withdraw from selling and the like are not likely to affect them. You may want to express your opinion to their management, but the basic rule is to sell on eBay if it's profitable, and withdraw if it is not. Actually, that's good advice for your relationship with any other site. They are partners, not friends. And, do not become dependent on any one of them.
As for Google, the message is again, you cannot be dependent on others, no matter how friendly and benign they might appear. Google is probably the nicest site to deal with. They have made "do no evil" the basis of their business model, and it has worked quite well for them. Nevertheless, it must be looked at as a business practice, subject to change if a different model appears to them to be more profitable. Now that Google is a public company, being profitable inevitably must be their number one goal. As the eBay incident reveals, Google is now more willing to test that border to increase profits. A line has been crossed. Make use of Google's services, particularly their free ones, to the full extent possible, but always keep your eyes open.