Ebay and Yahoo forge alliance

The emergence of search-related advertising as the internet’s biggest moneyspinner prompted a realignment among online powers on Thursday, as Yahoo and Ebay announced plans to link some of their services more closely.

The alliance between the biggest internet portal and e-commerce companies could contribute to a reshaping of activity on the web as the biggest internet companies seek new ways to tap into each other’s audiences.

Ebay said it would start to carry adverts supplied by Yahoo’s online advertising network on its US auction site, a move that will bring advertising to one of the last big untapped online communities.

The e-commerce company had discussed similar links with Google, which operates the leading search advertising network, and Microsoft, which earlier this month formally unveiled its own rival network.

The move echoes a link between Google and AOL last year and further reduces the number of potential partners for Microsoft.

Meanwhile, Google announced that Dell would include its search software on new PCs, a move that will give the internet company direct access to PC users and help reduce the risk that Microsoft will use its desktop dominance to promote its own search tools. Dell PCs will include Google’s desktop search tool, as well as a toolbar that acts to take users to the company’s internet search engine and other services.

By extending its reach to Yahoo’s audience of more than 400m users, “the deal should improve the position of an already very strong PayPal franchise,” said Mark Mahaney, analyst at Citigroup, though he added that the advertising link remained the biggest reason for the partnership.

Wall Street has been rife with speculation in recent weeks that the rise of Google and Microsoft’s determination to accelerate its own move on to the web would lead to deeper alliances between the big online companies, potentially even including mergers.

However, John Donahoe, head of EBay’s marketplace business, said the two sides had not held talks about deeper links than the ones announced on Thursday.

Microsoft and Google are competing to supply adverts to users of MySpace, the online “social networking” site owned by Rupert Murdoch’s News Corp.

As one of the fastest-growing new communities on the internet, MySpace’s success has given Mr Murdoch a potentially important bargaining chip as he looks for an ally among the chooses between the search companies.

As part of Thursday’s deal, Yahoo said it would offer Ebay’s online payment service, PayPal, to users of its services, and the two sides said they would study ways to use the Skype internet voice service, also owned by Ebay, to develop new pay-per-call advertising on Yahoo.

Ebay’s shares rose 8 per cent on the news, while Yahoo’s stock climbed 4 per cent.