eBay Falls Into Google's Sticky Arms

The hot and cold relationship between eBay (Nasdaq: EBAY) and Google (Nasdaq: GOOG) got steamy again this morning after the companies agreed to join forces in an online advertising alliance outside the United States.

The leading auctioneer will turn to the paid-search leader to serve up ads on its overseas auction sites. Both companies will share in the revenues.

The deal may come as a surprise because eBay had brokered a similar stateside deal with Yahoo! (Nasdaq: YHOO) for its flagship eBay.com site back in May. That came around the same time that Google was launching Google Checkout, a financial payments facilitator that is gunning for eBay's popular PayPal. eBay responded by making Checkout unacceptable as the means to seal the deal after a successful eBay auction.

The flame never did go out, though. Through all this, eBay remains the most prominent advertiser on Google's AdWords marketing service. It stands to reason that all that experience helps eBay appreciate the power of Google's breadth and the allure of serving up those ads itself to cash in on the paid search revolution.

Teaming up with Yahoo! overseas would have been awkward, as Yahoo! acquired a $1 billion stake in eBay's biggest rival in China, AliBaba.

This deal may be a material contributor for eBay, since it doesn't have the same kind of pricing flexibility in some overseas markets -- like China -- that it commands in the United States. The deal with Yahoo! is mostly for graphical advertising, since the more lucrative contextual marketing ad blocks would infuriate eBay's stateside listers. In international markets where eBay has to practically give away its listings, having Google serve up ads for rival products won't be as controversial.

Ultimately, it's a promising development for both eBay and Google. They didn't let pride get in the way of a deal that makes sense.

Shares of eBay were recommended to Motley Fool Stock Advisor newsletter service subscribers four years ago. A free 30-day subscription will grant you access to the eBay buy reports and updates. Yahoo! is also a Stock Advisor selection.

Longtime Fool contributor Rick Munarriz is a satisfied eBay user and he's got the 168 positive feedback points to show for it. He does not own shares in any of the companies mentioned in this story. Rick is a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance.