Google Blinks

The latest round of Google versus eBay resembles a schoolyard scrap, and Google has beaten a hasty retreat.

Google had invited online merchants who were attending eBay's annual Live! conference in Boston this week to a party promoting Google's new online payment system, Google Checkout.

EBay, which owns the payment system PayPal, was not amused.

It yanked all of its ads off Google's United States ad network -- no small matter considering the auction giant is the largest single advertiser on Google, representing between 1 and 2 percent of the company's $12 billion annual revenue, according to industry estimates.

While eBay said that the move was part of an experiment into what worked in online advertising, it might have been especially steamed by the apparent audacity of Google's timing.

AuctionBytes.com reports that an organization of eBay's top sellers had planned a party on the same night as Google's to celebrate with Yahoo a recent deal for Yahoo PayPal Checkout program.

In the end, Google blinked. It canceled its Google Checkout Freedom Party, scheduled for Thursday night, deciding that the party wasn't worth the trouble. The party, which advertised "free food, free drinks, free live music -- even free massages," was a cheeky dig at eBay's policy banning Google Checkout, which it views as a threat to PayPal.

"After speaking with officials at eBay," Google said in a blog posting, "we at Google agreed that it was better for us not to feature this event during the eBay Live conference."

Others agreed that it was a mistake.

"Very questionable decision making on the part of Google," Tim Boyd of American Technology Research wrote in a note to clients Thursday. "Not only was it the equivalent of giving a 2% customer the brush-off, it could have provided an opportunity for eBay [and other competitors] to get too much visibility into Checkout."

EBay officials expressed gratitude at Google's decision, but a Cantor Fitzgerald analyst, Derek Brown, told the San Francisco Chronicle that while eBay may have won this skirmish, the war between the two web giants is only heating up.

"We've seen that the two companies have been on a collision course for a long time," said Brown. "I have a difficult time believing that this resolves the showdown that seems to be coming."

Oh, and tech-Svengali Mike Arrington's verdict?

"Google looks like a complete wimp; eBay looks like a bully."

by Sam Gustin

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