Here is my 4 point assessment of impact on Google due to the landmark alliance between Yahoo and eBay.
1) Short term financial impact on Google may not be significant as I have pointed out in my post Dot Com War 2.0 - Is Yahoo & eBay partnership a Google Buster?
2) Medium to Long term Google will be affected by the broad Industry realignment that would happen in response to the alliance between Yahoo Inc. (YHOO) and eBay Inc. (EBAY) and seems to be already underway.
E.g. Microsoft (MSFT) & Amazon (AMZN) could potentially build up on their recent agreement where Amazon booted Google to use Microsoft Search on its website. A Washington Post article by Sara Kehaulani Goo (on May 2, 2006) calls the AMZN-MSFT agreement "A move that signals a small rebellion against Google but a large gain for Microsoft". Sara continues:
Last week, Amazon quietly removed the "powered by Google" wording near its search box when the company's contract with the search giant ended...Amazon visitors were directed to its own search site, called A9.com, to scour the Web. Although they are not labeled as such, A9's search results are now provided by Windows Live Search, Microsoft's new search engine.
Although the move is subtle, it speaks volumes when one of the Internet's biggest storefront site turns its back on the industry leader in search.
"Whenever the largest online retailer makes a decision, it's going to be a big deal," said Silicon Valley technology analyst Rob Enderle. "They're the bellwether for their segment. What they do, others will likely do or consider doing."
3) Medium to Long term Google may re-evaluate its do-it-all startegy after positioning itself as Search Engine that focuses on organizing world's information. Google may refocus its efforts on just Search -- Personalization, Verticals, Desktop, Lingual etc to win the trust of the rest of the Industry as the reliable partner fo Web-Search based Advertising.
4) Short to Medium term Google may go into an alliance spree in Asia and Europe -- trying to limit the damage outside US -- where the current Yahoo - eBay alliance has started. Several analysts have pointed out that the US based alliance between Yahoo & eBay may pave the way for partnerships in Asia (where Yahoo is strong and eBay is weak) and Europe (where eBay is strong). Commenting on the world-wide alliance possibilities Ritsuko Ando of Reuters stated:
Yahoo's strength and eBay's weakness in Asia, and vice versa in Europe, meant the world's biggest Internet media company and the top Web auctioneer had much to gain from combining forces overseas....Analysts said a key focus was China, where Yahoo, eBay, Google and...MSN have been vying for a slice of the world's second largest market with more than 100 million Web surfers.
While Yahoo has made strong inroads into Asia, partly due to local partnerships, eBay has had a tougher time. Ebay arrived late into some Asian markets, such as Japan, where its brand recognition was low, analysts said. Europe, however, contributes 80 percent of eBay's international revenue and sales in the region grew 32 percent in the first quarter.
Some analysts said Yahoo may face hurdles cooperating with eBay in Asia because of Yahoo's relationships with local partners, such as its 40 percent stake in China's Alibaba.com and its Japanese joint venture, Yahoo Japan Corp., with Softbank Corp.
Yahoo's Asian partners now compete with eBay and would have to sign on to any deal, or cut their ties. Alibaba.com boasts more than 70 percent of the business-to-business auction market in China, where eBay has struggled to find its footing.
"They don't own Alibaba or Yahoo Japan outright .... They'll have to sell this to their partnerships," said Denise Garcia, analyst at WR Hambrecht & Co.
Many analysts said eBay could use a partnership with Yahoo to reenter Japan after a failed attempt in 1999. "Japan is obviously a market which is of fair interest to eBay, in which Yahoo has a stronghold," said Oppenheimer analyst Sasa Zorovic.
Despite its weakness in Asia, eBay has enjoyed strong sales in Europe. EBay's Skype unit, which offers phone calls over the Internet, is also popular in the continent. EBay International President Matt Bannick said earlier this month that Europe may eventually overtake the United States as its biggest market.
In summary there may not be any short term financial impact on Google. But medium to long term it will be affected by an Industry realignment due to the Yahoo - eBay alliance. In response Google may re-focus on Search or seek new partnerships -- especially in Asia and Europe to limit the damage of the Yahoo-eBay alliance spreading ouside of US.
