Yahoo! Extends Their Network

There has been lots of discussion about the deal announced yesterday between Yahoo! and eBay.  It's a big deal in many ways and showcases the classic line about "the enemy of your enemy is your friend".

In my mind, based on a very cusory read of the outline of the deal, while it does seem to be a win/win, it strikes me as a much bigger win for Yahoo!.

The thing that struck me most about the deal is that this is the first time Yahoo! has sold banner inventory outside of their network. Yahoo! is becoming a third party banner network in addition to becoming a contextual ad network.

It's a smart direction for them to take and starting off with eBay seems like a good way to go. I am not familiar with the specifics on the advertising deal, but if Yahoo! gets the right to sell banners throughout the eBay service, then they have just increased the size of their network by 33%, from 37bn page views per month to 50bn page views per month (Comscore Media Metrix data).

That seems to be quite a deal for Yahoo!.

Comments

[Christian Cadeo]

That was my thought exactly. It was somewhat suprising that the market bid up ebay more than yhoo yesterday. I guess it was the notion that ebay with this deal has found another way to monetize their pages. My reading is that Yhoo was the one who came ahead with not only the increased inventory, but also having access to all the datasets that ebay has on their site. That is a very powerful combination for advertisers.

[Erik Schwartz]

It would have been better if we had just bought them in 1997. Their were a bunch of people pushing for that but it got killed in upper management.

The fear of getting "eBay'ed" again drove Y! do do some stupid deals a few years later.

[Andrew Fife]

Actually, I think this is a better deal for ebay because the encroachment of search into commerce is a greater threat to ebay's overall business model than it is to yahoo, which would/could benefit from the trend.

[Dave McClure]

probably lost in all the rest of the noise, but it's also a great opportunity for eBay to extend the use of PayPal across the largest collection of content, subcription, and shopping properties on the web.

these days, the value of eBay is more & more based on the value of PayPal... and depending on how much promotion PayPal gets on Yahoo properties, that value could be increased substantially.

[full disclosure: i used to work for PayPal]

[Steve]

Much much better deal for eBay IMHO:

1. ad inventory inside eBay is near worthless. first, people have already drilled into a search path, unlikely to be distracted elsewhere. second, eBay merchants will rise up in rebellion if ads are made to succesfully distract shoppers. finally, if bthat inventory was worth squat, the geniuses at eBay would have made hay there ages ago (anyone predicting Amazon is going to have a new Google-like business selling ads on their pages?)

2. not noted is the HUGE amount eBay will now potentially save on their own ad buys. eBay essentially does not advertise anywhere EXCEPT on serach engines -- yet check their 10Q's and you'll see they spend HUMUNGOUS bucks on that. presumably yahoo just took a massive haircut on rates to lock in eBay massive ad spending

3. i second the thought about the huge value to eBay in making PayPal the de facto currency of Yahoo. gonna be impossible to ever evr undo that, no?