After eBay pulls ads, Google cancels offending party

A contrite and repentant Google canceled a party that irked eBay and that a source said led eBay to remove all of its ads from Google's U.S. network earlier this week.

On Monday, Google announced it would throw a party in Boston on Thursday evening designed to attract eBay merchants who would be in town to attend the eBay Live annual seller conference.

The purpose of the party: Protesting eBay's decision to forbid merchants in its marketplace from using Google's Checkout online transaction system.

The online auction company found Google's move to be in bad taste, and at some point after the party was announced, eBay took the drastic measure of pulling all of its ads from Google's AdWords U.S. network.

A source familiar with the situation said that the decision to turn off the ads had come from eBay's top executives who were steaming over what they perceived as a low blow by Google designed to embarrass eBay in front of its top merchants.

It would be hard to disagree with eBay executives' assessment, considering the mocking tone of Google's party announcement, encouraging eBay merchants to gather at the Old South Meeting House, where in 1773 mass protest meetings were held, leading to the Boston Tea Party.

"We'll use the same spot where revolutionaries launched the Boston Tea Party to celebrate freedom with free food, free drinks, free live music -- even free massages," the official blog posting reads.

Then, on Wednesday afternoon, Google unexpectedly cancelled the party after its officials apparently determined they had gone too far.

"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," reads a posting on that same blog.

eBay, which had earlier blasted Google for the planned party, said it was pleased with Google's decision. "It's reassuring to see that Google recognizes that their actions were inappropriate. We're pleased that our partner chose to do the right thing and cancel their event," eBay said in a statement.

However, eBay is keeping its ads off AdWords, eBay spokesman Hani Durzy said. The eBay Live event begins Thursday in Boston.

The spat is yet another sign of what many consider a significant deterioration of relations between the two Internet giants in recent years as Google has become a partial competitor to eBay.

Earlier Wednesday, Durzy said the decision to pull out the ads wasn't related to the party and characterized it as an ordinary experiment by eBay, similar to others the company constantly does to determine the best allocation of its advertising and marketing budget.

But there is nothing ordinary about eBay and Google, and the pullout is likely to have significant repercussions for both companies while it lasts: eBay is the largest paid search advertiser in the U.S., and Google is the country's largest paid search ad network.