YHOO EBAY
Shares of eBay Inc. (EBAY) and Yahoo Inc. (YHOO) surged early Thursday after the companies announced a partnership that strengthens the positions of each in the increasingly competitive Internet landscape.
The agreement covers Internet searches and advertising, online payments, a co-branded toolbar and the possibility of developing so-called click-to-call functionality.
The pair plan to roll out the initiatives this year, with testing happening in the next several months. EBay and Yahoo expect all the initiatives to be fully up and running next year.
Financial terms of the deal weren't announced, but both companies said they don't expect it to have a material impact on their financial results this year.
"It's a positive for both companies," Stifel Nicolaus analyst Scott Devitt said. "It's difficult to say which it's better for."
About 20 minutes into the session, shares of eBay were up 8.8% at $32.85, on trading volume of 12.2 million shares, compared with average daily volume of approximately 17.2 million shares. Yahoo shares were up 3.6% at $32.93, on volume of 7.8 million shares, versus a daily average of about 21.6 million.
An announcement doesn't come as a total surprise. The Wall Street Journal reported last month that online auction company eBay was in discussions with search behemoth Yahoo and Microsoft Corp. (MSFT) about possible deals in an effort to take on Google Inc. (GOOG).
Yahoo will become the sole third-party provider of all graphical advertisements on eBay, as well as sponsored search for complementary products on some eBay search results pages in the U.S., the companies said in a press release.
EBay and Yahoo said they will work together to increase and enhance the way eBay auction listings appear in Yahoo searches. Better placement on Yahoo's search pages could help Yahoo win away eBay's search-ad business from Google, which counts eBay as one of its largest advertisers.
Google shares were down 0.5% at $379.52 in recent trading.
Also, Yahoo will use eBay's online payment system PayPal as the sole third-party provider of its "online wallet," according to the press release. This will allow customers to pay for Yahoo services from bank accounts, credit cards or balances associated with their PayPal accounts.
PayPal has 73 million accounts in the U.S.
Yahoo is getting a "massive new advertising platform to sell its ads on" eBay, and eBay's PayPal has landed a "massive customer," Devitt said.
"I think that the relationship with PayPal becoming the exclusive third-party provider for Yahoo is a clear win for eBay," William Blair & Co. analyst John Murphy said.
Stifel Nicolaus analyst Devitt doesn't own shares of eBay or Yahoo, and the firm doesn't do investment banking work for it.
William Blair analyst Murphy doesn't own shares of eBay and the firm doesn't do investment banking work for it. William Blair makes a market in eBay's stock.
-By Desiree J. Hanford
