eBay, AOL extend marketing pact

The new deal, signed last week, will extend until 2004 the companies' marketing relationship, which was due to expire this year, eBay spokesman Kevin Pursglove said. As part of the renewed agreement, San Jose, Calif.-based eBay will explore advertising on AOL Time Warner's television and print properties, he said.

"This has been a mutually beneficial relationship that we want to continue," Pursglove said. "It's proven to drive a lot of traffic to eBay."

AOL representatives did not return calls seeking comment. Pursglove declined to give the financial details of the deal.

However, eBay sees the deal causing "no material change" to its projected operating results and liquidity, according to a document the company filed with the Securities and Exchange Commission.

One of the few successful e-commerce companies to date, eBay has set an ambitious goal for itself of $3 billion in revenue by 2005. To reach that goal, which would entail growing at 50 percent a year during the next four years, the company has branched out into fixed-price storefronts, promoted its auctions of "practical" items such as cars and computers, and expanded overseas.

But the company will also need to keep bringing in new buyers and sellers. In that vein, eBay signed a similar agreement with Terra Lycos in June. eBay also has relationships with Microsoft and Walt Disney.

In the SEC document, eBay said the new AOL deal provides for "additional exclusivity" for AOL, although it did not get into specifics.

Meanwhile, the agreement is welcome news for AOL, which is expected to lay off "several hundred" employees in an effort to meet ambitious revenue and earnings targets. Although the company's earnings met Wall Street's expectations last quarter, its revenue fell far short.

As part of the renewed agreement between AOL and eBay, the companies will maintain their co-branded Web site. AOL will also continue to sell ads for eBay. Such ad sales comprised about 5 percent of eBay's revenue in the second quarter.

eBay and AOL signed a four-year agreement in 1999, in which eBay agreed to pay the giant ISP $75 million to promote its auction site on AOL's Web sites and online service. The new agreement overlaps and extends that previous agreement, Pursglove said. eBay originally inked a marketing deal with AOL in 1997.

The agreement with eBay is the second big e-commerce deal for AOL in two months. Last month, AOL announced that it agreed to invest $100 million in Amazon.com as part of a multiyear marketing agreement between the two companies.

News.com's Margaret Kane contributed to this report.