Update: eBay resumes advertising on Google

After a 10-day boycott of Google's AdWords, eBay will once again start advertising on the massive advertising network, though on a smaller scale

eBay will once again advertise on Google's U.S. AdWords network, but its spending on it will be significantly lower.

eBay will start turning on its U.S. AdWords ads on Friday, ending a 10-day pullout that made headlines worldwide and was seen as a sign of the companies' deteriorating relationship.

eBay has determined that it doesn't need to spend as much as it did before the ad blackout, eBay spokesman Hani Durzy said Friday.

"In general, our AdWords spending will be significantly lower than it was before," Durzy said, declining to be more specific.

eBay reallocated its U.S. AdWords budget to other advertising channels and found that it isn't as dependent on AdWords as it thought before doing this test, Durzy said.

By spending part of its AdWords budget elsewhere from now on, eBay will obtain better value in terms of traffic to its marketplace, he said, adding that the AdWords blackout was never intended to be permanent.

"We can confirm that eBay is buying keywords through AdWords," a Google spokesman. "Over the last seven years, we have worked closely with eBay to drive customers to their site and build value for their business and the business of their sellers. We look forward to a continued partnership."

Interestingly, during the first week of the Google ad pullout, eBay's traffic actually rose slightly about 0.9 percent, a Hitwise spokesman said on Friday.

During this time, eBay drew about 9.9 percent of its visitors from Google, compared with 10.7 percent the previous week, according to the spokesman from Hitwise, a Web traffic monitoring company.

It's not clear whether the new budget reduction will affect eBay's position as the largest advertiser on Google's U.S. AdWords paid search network.

In this year's first quarter, eBay placed 67 percent of its total sponsored search link impressions, 8.62 billion, on the Google U.S. ad platform, according to Nielsen/NetRatings.

As such, eBay generated 3.8 percent of Google's U.S. sponsored search link impressions, the largest percentage of any advertiser during the quarter, according to a Nielsen/NetRatings spokeswoman.

eBay shocked the Internet industry when it pulled its ads off of the U.S. AdWords network early last week. eBay is the largest paid search advertiser in the U.S., and Google is the country's largest paid search ad network.

In March, eBay ranked first in the U.S. among paid search advertisers with 802 million sponsored link exposures, or 4.1 percent of the total, according to comScore Networks. Its position is even stronger if one factors in eBay's comparison shopping engine, Shopping.com, which ranked third on that list with 357 million sponsored link exposures, or 1.8 percent of the total.

Meanwhile, Google topped the list of search engine referrers, handling 57.3 percent of all paid search ad clickthroughs, comScore said. Yahoo took a distant second place with 26.1 percent of clickthroughs.

At the time of the ad pullout, eBay characterized the move as a regular "experiment" similar in nature to tests it runs regularly to determine the best mix for its advertising spending.

Yet, a source told IDG News Service that the move was an angry reaction to Google's plan to throw a party in Boston last week to attract eBay merchants who would be in town to attend the eBay Live annual seller conference.

Apparently, eBay's top brass took exception to Google's party, whose purpose was protesting eBay's decision to forbid merchants in its marketplace from using Google's Checkout online transaction system.

After eBay turned off the ads, Google cancelled the party, but eBay kept the ad blackout in place until today, when it will be lifted.

Google and eBay have increasingly become competitors in areas like online payments, where Checkout and eBay's PayPal compete, and product listings.

eBay's decision to switch off its U.S. AdWords campaigns didn't sit well with many eBay merchants who felt that the move would ultimately affect them more than it would affect eBay.

"It has definitely had a negative effect on our business," said Jonathan Kuhlmann on Thursday, before eBay announced it was reinstating the ads.

Kuhlmann is the founder of eBay footwear store Grapevine Hill, which has Titanium PowerSeller status, meaning it generates average monthly sales of at least $150,000.

"We're very concerned about it," he said.

This story was updated on June 22, 2007

Copyright © 2007 IDG Communications, Inc.

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