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There’s been a lot of chatter this week about the brewing battle between Google and eBay. Google struck first, holding a “protest party” outside of the eBay live show in Boston. eBay responded by removing all of it’s ads from Google. Google backed down, cancelling it’s party in Boston.
I’ve seen this coming for a while now (loyal readers will no doubt recall my “Google vs Ebay” post from about a year ago and my updated post not two weeks ago). In my opinion, Google has long considered eBay – not Yahoo or MSN – as their chief competition. And I have felt that eBay has not taken the Google threat seriously enough – perhaps until now.
What’s clear to me, however, is that eBay is not strong enough to battle Google alone. eBay needs Google more than Google needs eBay. The estimated $400 million Google might lose if eBay stops advertising on AdWords is significant, but not debilitating. But if you assume that eBay is spending an average of $.20 per click on Google, that’s two billion annual visitors that eBay would be losing. That’s a lot of Disneyana and antiquarian book sales.
If eBay really wants to fight Google, they need to enlist some help. My suggestion: talk to Amazon.
Amazon and eBay have something in common that sets them apart from virtually any other company online – both are experts at purchasing “long tail keywords.” Type in virtually any product (or non-product, for that matter) on Google and you’re almost certain to see eBay and Amazon showing up. Add in eBay’s Shopping.com and the chances on any search are close to 100%.
So if Amazon and eBay suddenly stopped all spending on AdWords, this would result in a lot of lost revenue that Google simply couldn’t replace. You see, on many keywords, if one advertiser leaves, this doesn’t have much of an impact on Google, because a different advertiser is waiting in the wings to assume the departing advertiser’s position. But with obscure terms like “first edition leather bound 17th century book”, there are few replacements to eBay and Amazon.
Amazon and eBay, however, don’t just contribute to Google’s coffers via AdWords. Both have huge affiliate programs, and Shopping.com places Google ads on their site via AdSense. eBay also owns major Google spenders like Half.com, StubHub, and Rent.com.
If Amazon and eBay stopped AdWords spending, removed AdSense, and prevented their affiliates from buying ads on Google, this becomes pretty significant for Google. I have no idea how to predict the financial impact, but my guess is that there would be at $1 billion of revenue for Google at play. That kind of lost revenue will have many negative impacts on Google, like a stock price drop and increased difficulty in acquiring companies for stock.
Of course, as noted, this strategy would not be without its impact for eBay and Amazon. You can’t replace billions of users overnight. I do believe, however, that there are ways to spend that extra billion dollars productively.
eBay’s recently acquisition of StumbleUpon for $75 million was a great move that could have significant competitive advantages against Google. Having a couple hundred million dollars lying around makes it easier to acquire strategic technology and sites with loyal customer bases like StumbleUpon.
With mass media channels like TV and radio hurting these days, eBay or Amazon might be able to lock up a lot of non-search exposure at a discount rate. I’ve recently seen eSurance.com plastering San Francisco with offline campaigns (buses, billboards, radio, TV). Not sure how this is working for them, but this sort of campaign could help remind folks to go back to eBay or Amazon to see what’s new.
Finally, there’s always research and development. Google spends a lot of money on their engineering team. An extra billion could buy away Google’s talent, or provide more resources for the in-house resources already there.
If any of Google’s competitors really want to stop the Google train from rolling over them, they’re going to have to join forces. Such a move would be painful for every company involved, but it may end up being the only hope anyone has to level the playing field against Google.