EBay said today that Yahoo will sell advertising on its auction site and also will use eBay's Paypal service to handle payments.
The deal comes as investors are increasingly concerned that eBay's highly profitable shopping service is being undercut as consumers increasingly use search engines to find Web sites selling products they are interested in. Moreover, there is a rise in free sites that match buyers and sellers, such as Craigslist, Google Base, and Yahoo's own free auction service.
The deal today offers eBay some new ways to make money from its large audience, but it does not directly address the concerns about competition. Yahoo will continue to offer is auctions and other online shopping services that compete directly with eBay.
For Yahoo, the deal represents a potentially significant expansion of its advertising business. EBay agreed to place text advertising sold by Yahoo on its site. That gives Yahoo a new major partner just as MSN, the largest user of Yahoo's text ads, has switched to selling its own advertising.
EBay has long been wary of placing text ads on its site because they are likely to refer people to Web sites that compete with its marketplace.
Meg Whitman, eBay's chief executive, said the company was starting to change that policy because "we have to embrace some of the things that are happing on the Web." Still, she said, the company will test the impact of the text ads to make sure they do not hurt its revenue.
She added that the text ads would be restricted so they did not offer products that directly competed with eBay's sellers. Rather they would be for "complementary products," like accessories, and they would also appear when a user searched for a product that was not available on eBay.
At the same time, eBay agreed to have Yahoo sell graphical display advertising on its site, the first time Yahoo has sold graphic ads for another company.
"EBay brings the best of quality inventory and a huge community," said Terry S. Semel, Yahoo's chief executive. "It gives us the opportunity to do a big job."
Yahoo and eBay said the revenue from the deal would be small this year and they declined to characterize its financial impact for next year.
Google, which is by far the leader in selling text ads for other Web sites, has been moving to sell graphic ads as well, and earlier this week said it would start selling video advertisements for other sites. Google's approach is to create an automated auction in which marketers enter their own advertisements and bid for placement. Yahoo, which uses such an auction for text ads, will sell the graphic ads on eBay through its traditional sales force, which negotiates rates with major marketers.
EBay will also offer its customers a new version of its browser toolbar, which will encourage people to use Yahoo search and other services. At the same time, Yahoo agreed to offer eBay's Paypal service as one option for customers choosing to buy services on Yahoo's site.
And the companies said they would explore developing features that would allow people to click on advertisements on either of their sites and be connected with the advertiser through either eBay's Skype voice chat service or the voice calling feature of Yahoo Messenger, a direct rival to Skype.
Ms. Whitman said this deal will not scale back eBay's huge spending on advertisements on Google. Search and other advertising brings in about 40 percent of eBay's traffic.
She added that she did not see the competition from search engines and free classified sites as undercutting eBay's position with consumers.
"There is a lot more to running a marketplace than getting a lot of listings," Ms. Whitman said. "There is trust and safety, and payments and reputation. That stands eBay in good stead."
