AE Monthly

Articles - July - 2007 Issue

The Google-eBay Spat and What It Means to You

Google

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.

AE Monthly


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