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http://money.cnn.com/2006/05/25/tech...ahoo/index.htm

Yahoo, eBay announce partnership
Yahoo to be exclusive provider of ads on eBay site, while eBay's PayPal service to be exclusive provider for Yahoo's online wallet.
May 25, 2006: 9:29 AM EDT

NEW YORK (CNNMoney.com) - Yahoo! and eBay announced a strategic partnership Thursday to provide services to each others' customers.

The deal, designed to boost their position against Microsoft Corp. and Web search leader Google Inc., underscores recent speculation the two companies could eventually merge.

Under terms of the deal, Yahoo (Research) will become the exclusive third-party provider of all graphical ads throughout the eBay (Research) site, and sponsored search for complementary products on some eBay search results pages in the United States.

In addition, eBay's online payment service PayPal will become the exclusive third-party provider of its online wallet.

In addition, Yahoo Web search features will be integrated into a co-branded version of the eBay toolbar, and the companies said they would explore developing "click-to-call" ad technologies on their respective Web sites.

"Click-to-call" provides a link inside an advertisement that allows consumers to directly call the advertiser to pursue a transaction.

Under the pact, which gives Yahoo access to eBay's vast base of online shoppers, the companies will begin to roll out their joint initiatives this year.

Shares of eBay rose 8 percent and Yahoo climbed 4 percent in pre-market trade following the announcement. Google shares fell 1.25 percent, while Microsoft (up $0.71 to $23.50, Research) shares were unchanged.

Talk of a combination between the Internet giants has been rife recently on Wall Street. It comes amid slowing growth and as competition among the biggest companies -- Google (up $5.67 to $381.25, Research), Yahoo, eBay and Microsoft's MSN -- intensifies. Before Thursday, EBay's stock had been down 30 percent on the year, while Yahoo was off 20 percent and Google was down 10 percent.

"The biggest component here is the ability to monetize eBay traffic with Yahoo's brand," said Jefferies & Co. analyst Youssef Squali. "We see it as positive for both parties."

Yahoo and eBay said they do not expect the partnership to have a material impact on their financial results this year.