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eBay unveils keyword ad system

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Online auction giant eBay is to launch a keyword advertising system directing web surfers to product auctions related to the website they are visiting.

The new system, called adContext, is similar to Google's AdSense platform. It allows websites to display ads for relevant eBay inventories, and site owners hosting these auction notices to get a slice of the sales. Contextual adverting is already used by Google and Yahoo!.

An example best illustrates the idea: a website concerned with the Star Wars movies may have ads on it that bring the web visitor to an eBay auction for Star Wars collectible figures. These ads will most likely be a photo of the item for sale, like a model wookie for example.

Analysts in the US said nothing about wookies, but they did predict that the system may prove popular with bloggers who could use it as an extra source of revenue. The eBay plan seems to be that bloggers would be able to run snippets of code on their website to automatically showcase items for sale on eBay.

The adContext systems works by reading keywords embedded in websites which it then links to auctions. According to eBay, "the contextual ads take into account the popularity of certain keywords on eBay, not just the keywords on a given website".

eBay executives reportedly discussed the initiative at a conference held in Las Vegas in early June. The conference drew together partners developing eBay's expanding network of ventures, which now includes PayPal, Skype, Shopping.com and e-commerce software service ProStores; alongside eBay's traditional online auction business.

Not unlike Amazon.com, eBay tends to open up significant portions of its infrastructure to outside developers, relying on partners to drive additional sales through eBay's core auction platform.

eBay also recently hooked up with search engine Yahoo in a partnership which will see yahoo become the exclusive third-party provider of all graphical ads on eBay and will offer sponsored searches for complementary products on some eBay search results pages. In return, eBay's secure online payment system, PayPal, will become the default payment service on all Yahoo channels.

It is not yet clear how this relationship will be affected by the adContext programme or indeed, whether it is something the two internet giants have worked on together.

Ad driven business models have been touted by many technology analysts as the future core income stream for many internet giants such as Google, Yahoo! and MSN. However one note of warning was sounded by eMarketer chief executive Geoff Ramsey at a conference held in New York in February. He said "consumer trust in advertising has plunged 41 per cent over the past three years," and only 10 per cent of consumers "trust" ads today.

If these stats are accurate then internet companies will have to invest a lot of time and energy into improving consumer confidence in their new advertisement driven business structures.

Copyright © 2006, ENN

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