eBay and Yahoo! in joint bid to see off Google

eBay and Yahoo! have announced they are forming a partnership centred on advertising, ecommerce and search.

As the internet search and commerce markets grow even more competitive, the two companies on Thursday said they have decided to help each other out.

As part of the deal, Yahoo! will become the exclusive third-party provider of all graphical ads on eBay and will offer sponsored search for complementary products on some eBay search results pages in the US.

Specific financial details were not released but both companies said the deal would not be material to 2006 results and that any financial impact for 2007 and beyond would be detailed when the companies issue their outlooks for that period.

Yahoo! will make eBay's PayPal service the exclusive third-party provider of its online wallet, allowing customers to pay for Yahoo! services from bank accounts, credit cards or balances associated with their PayPal accounts. PayPal will also be integrated into product offerings for Yahoo! merchants and publishers, including the Yahoo! Publisher Network, Yahoo! Search Marketing and Yahoo! Merchant Solutions.

The two companies will also explore co-developing their respective voice over IP services. That project will look at releasing "click-to-call" ad technologies on their websites, using both Yahoo! Messenger with Voice and eBay's Skype service.

Yahoo! search and site links will be integrated into a co-branded version of the eBay toolbar, the companies said.

The companies plan to begin releasing the new products this year, starting with a several-month-long trial phase, and hope to complete the launch next year.

Yahoo! CEO Terry Semel said in a statement: "This partnership with eBay provides us with a great opportunity to further extend our sponsored search and graphical advertising reach to one of the largest and most active communities on the web."

Both eBay and Yahoo! have seen increasing competition in their core markets, most notably from big hitters Google and Microsoft. Google's Base service, for instance, which launched last year, allows people to post and search for information ranging from apartment listings to recipes.

Earlier this week, Wall Street analysts speculated that a tie-up between eBay and Yahoo! would make sense, explaining that pooling their resources would give the companies more leverage in search, advertising and customer breadth.

Reports had surfaced earlier this year that eBay was in talks with both Microsoft and Yahoo! to form a partnership to fight off Google.

Margaret Kane writes for CNET News.com