The world's number one online auction site and the world's number one automaker are now on the same team. eBay (Nasdaq: EBAY) and General Motors (NYSE: GM) teamed up last week to form a strategic marketing relationship that both sides hope will help them grab a bigger piece of the online auto industry pie.

The agreement involves joint promotions and community events on eBay Motors, where consumers can bid on cars, trucks, parts, and accessories. In addition, GM will become the exclusive automotive sponsor of eBay subsidiary Kruse International, the largest live auctioneer of collector cars in the world.

The joint venture, which runs through 2001, also calls for GM to have an advertising presence on eBay. This is yet another step toward something shareholders such as myself have been looking forward to: eBay's gradual move toward diversifying its revenue stream. Although still a small portion of the overall picture, advertising dollars could one day become a significant source of income. Company executives, however, continue to downplay its importance.

The online auto industry
Would you by a used car online? How about a new one? There are interesting aspects to consider as researchers try to gauge the overall impact of the Internet on auto sales. For instance, some folks use their computers for research before they head out to a traditional showroom. Others may do the opposite, checking out cars or trucks in person before going online in search of the lowest price.

At any rate, firms such as J.D. Power & Associates and Forrester Research say the Web may soon influence half of all new car sales. Simon Rothman, general manager of eBay Motors, told me the online used car industry currently generates sales of $370 billion a year, with better profit margins than new cars. When financing and related components are factored in, that figure more than doubles.

There are many companies fighting for market share. If you're a consumer looking to make an online purchase, you'll have to wade through dozens of dot-coms: Autobuyer, Autobytel, AutoExotic, AutoNation, AutoVantage, Autoweb, eBay affiliate AutoTrader, and many more.

Rothman says eBay Motors' growth is "somewhere between extremely strong and explosive." He says the company is seeing double-digit monthly, and sometimes weekly, growth. Annualized sales of autos, trucks, motorcycles, RVs, snowmobiles, and all related parts and accessories are more than $1 billion. eBay Motors is the number one player in a market that saw 40 million to 50 million vehicles change hands last year.

Benefits of the alliance
The GM deal gives eBay the chance to pair up with one of the top brands in the industry and raise the level of excitement on the site, according Rothman. He says to look for more promotions, special events, and for GM to offer eBay users products they cannot find elsewhere online.

In the meantime, GM's Rich Christensen says his company will continue to increase its online presence. Teaming with eBay is a natural, he says, because the site has "one of the most dedicated and participatory user groups in the e-commerce world."