How Google's Latest Algorithm Update Hurt eBay

Last week, Google (NASDAQ: GOOG  ) (NASDAQ: GOOGL  ) unleashed a panda into the wild, and it's out there killing businesses.

The newest update to Google's search algorithm, Panda 4.0, is aimed at penalizing websites with thin, non-authoritative content. One interesting side effect, however, has been its effect on retail websites. eBay (NASDAQ: EBAY  ) , notably, saw a drastic impact on its Google search rankings last week.

Do eBay and its investors need to worry about the impact Google's search algorithm may have on the online retailer's business?

He wouldn't hurt a thing. Would he? Source: Flickr user autan

How badly was eBay hurt?
eBay used to find its site listed on the first page of Google results for hundreds of prime search queries. Last week, eBay's share of top 10 rankings fell considerably after Google rolled out updates to Panda.

According to Peter Meyers, who writes for Moz Blog, eBay made it to the first page of Google results for about 1% of all search terms in Moz's data set. (Note, that's not 1% of all searches, but search terms. The actual number of searches depends on how many people are searching for those terms. Make sense?) Over the course of three days, from May 17 to May 20, eBay's share of top 10 rankings fell below 0.3%.

That's a 70% decrease in visibility.

Why did Google penalize eBay?
Google penalized websites for two reasons last week. The first, as mentioned, is websites with thin content or a lack of authority on a subject or keyword. Second, websites that use spammy tactics to generate links for keywords. Sometimes the two go hand-in-hand.

eBay has authority. There's no doubt about that. As a website facilitating billions of dollars in e-commerce every year, Google probably wouldn't penalize eBay for a lack of authority.

On the other hand, eBay utilized some questionable tactics when generating links to its homepage, which may be the reason Google penalized the website. eBay used a clever linking structure on its site that allowed it to rank for hundreds of keywords.

Rishi Lakhani at Refugeeks pointed out that all of eBay's organic Google search results have "/bhp/" after the main domain name. Clicking through eBay, you'll find them under the "See also" header on eBay's search results page. The links seem to be generated based on popular search terms. Apparently, Google doesn't like this tactic, even if the links are arguably useful.

Those links are the ones that used to pop up on Google's search results. Source: screenshot

How important is Google traffic for eBay?
Although it's unclear how much traffic eBay receives from organic search results, it's safe to say the amount is significant. eBay is a big customer of Google's Product Listing Ads and other Adwords products, which are placed above search results, so management sees value in ranking highly on Google.

In fact, this isn't the first time eBay has been negatively affected by changes in Google's search algorithm. In eBay's 10-Q, it notes "changes by Google have significantly reduced the amount of traffic our Marketplaces business receives from free search on Google." Interestingly, management doesn't explicitly state it as a risk to the business, though.

With more and more online shoppers starting their search from a search engine instead of specific e-commerce sites, however, Google's impact on eBay ought to increase. Google, and other major search engines, are developing products for comparison shopping. eBay has its own comparison site,, but the trend favors the large search engines.

eBay's far from doomed
Google searches are certainly an important source of traffic for eBay, and Google penalized eBay for misbehaving. The good news, however, is that Google and eBay have a strong relationship with one another through Google's advertising products. If eBay corrects its spammy link tactics, the Google gods may smile upon eBay once again.

As we've seen previously, it's much easier to correct for spammy link tactics than it is to gain authority.

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Read/Post Comments (5) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 29, 2014, at 9:56 AM, NobodysFool2011 wrote:

    Google is no better than eBay. Both companies are drunk on power monopolies that destroy small businesses on a whim.

    Both companies are flush with cash and have a predatory history of either snapping up or destroying potential competition.

    Both companes have horrible customer service, but Google doesn't even have a phone number. Talk about a lack of transparency.

    As for "spammy" links, search Google for somebody with an uncommon name and see all the doorway pages from Facebook and all the spam sites that use names generated from Facebook.

  • Report this Comment On May 29, 2014, at 10:38 AM, motleyLiam wrote:

    Let's get something straight - if anyone has hurt eBay - it's eBay themselves.

    If it makes things easier for them to place blame on Google...

    However, this would be a paradox, since eBay is under the delusion that people go to their homepage first and start searching.

    So, which is it? It doesn't really matter, because eBay has alienated so many (including Google) people, and it's finally catching up to them.

  • Report this Comment On May 29, 2014, at 11:36 AM, hung0820 wrote:

    There are other search which I used is Bing and Yahoo. I never used Google because has a tracking list of your personal information. Also I believe Bing is better than Google in USA. Therefore, if Google taken eBay search out their system listing then eBay will try different way to get it on top, but I don't think this is effect the business. eBay name is well known already and therefore is not going to effect the business.

  • Report this Comment On May 29, 2014, at 12:48 PM, NetAnaylyst wrote:

    Ebay is in a massive downward spiral that Wall Street has not yet become completely aware of. Adverse publicity concerning the recent hacking event has lowered traffic and sales enormously. CEO John Donahoe should be forced out if he dosn't resign of his own accord.

  • Report this Comment On May 30, 2014, at 10:26 PM, OldeKingTroll wrote:

    Between Google's antics and eBay working overtime to shoot themselves in the foot as often as possible,, eBay sellers are in a no man's land.

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Adam Levy

Adam has been writing for The Motley Fool since 2012 covering consumer goods and technology companies. He spends about as much time thinking about Facebook and Twitter's businesses as he does using their products. For some lighthearted stock commentary and occasional St. Louis Cardinal mania

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