EBay Reworks AOL Ad Deal, Plans Pop-Up Tests

Auction giant eBay has renegotiated a long-term advertising deal with AOL, which now must meet performance targets to keep the partnership active.

EBay also warned its members that it will begin testing an in-house pop-up ad campaign in coming weeks.

EBay’s quarterly report, filed Friday with the U.S. Securities and Exchange Commission (SEC), delivered the news about the AOL deal alteration. While the two companies originally had inked a deal that was to expire at the end of 2004, the revamped agreement requires AOL to meet performance guidelines in order to extend the deal past March 2003.

The new deal also reduces eBay’s commitment to AOL in 2004 from US$18.5 million to about $15 million. And even if AOL hits its unspecified performance targets, eBay will spend no more than $10 million in 2005 on the AOL network.

“It’s not that much money” for either company, Morningstar.com analyst David Kathman told the E-Commerce Times. For AOL, however, he added, “it’s more of a symbolic blow, which raises the prospect of more ad deals being reworked. AOL and eBay have had a close relationship, and this just shows how bad things have gotten in the online ad market.”

Bad Timing

While the move lightens eBay’s commitment to pay AOL for advertising, it may give AOL Time Warner an unneeded black eye as the media conglomerate awaits a long-promised recovery in the online advertising market.

That recovery may finally be gathering steam. A Nielsen//NetRatings report released Monday found that the number of unique online ads rose 33 percent from January to April, reaching 70,000 last month, and may indicate that “the online ad market is finding some new traction,” according to NetRatings vice president Charles Buchwalter.

“The downward trend during the past year has been reversed,” Buchwalter said.

Pop Tarts

Meanwhile, eBay posted a note on its message board informing users that it will test pop-up ads on its home page during the next few weeks.

The ads will appear when users leave eBay’s site and will link to merchandise or services available either on eBay or on “other sites,” according to the auction giant.

“These pop-ups will not be visible to all users at all times,” the message said, noting that users will see a limited number of pop-up ads per day.

EBay did not respond to requests for additional comments on the new ad program.

Pop-Up Controversy

Pop-ups became prominent on the mainstream Internet about a year ago as online media properties began to search for ways to counter a sagging ad market.

They became a flashpoint for controversy when such companies as X10.com used them to inflate Web traffic statistics. But researchers questioned the value of that traffic in terms of generating sales.

EBay said its pop-up campaign will be used to prevent users from leaving its site.

Familiar Path

The company’s Half.com unit unveiled a similar program last year. Under that plan, users could voluntarily download a browser plug-in that would cause a Half.com window to pop up when they visited another Internet site selling products that also were for sale on Half.com.

“We believe that, when properly used, this tool can help retain users who are flowing from eBay’s home page out to the Internet,” eBay said. “The primary goal is to offer compelling reasons for buyers to return to eBay to bid and buy the items listed by the community of sellers.”

“I’m sure there will be an outcry from eBay’s users, who have historically resisted any change,” Kathman noted. “But I’m also sure that eBay will be watching the response carefully. They’re just exploring potential new sources of revenue, but when those sources impact their core community, they’re going to tread more lightly than usual.”

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