Yahoo! and MSN have been losing market share in web search to Google over the past year—Google now has half the market. They have also fallen further behind in their advertising technologies and networks, so that both make less money than Google does from the same number of searches. Safa Rashtchy, an analyst at Piper Jaffray, a securities firm, estimates that for every advertising dollar that Google makes on a search query, Yahoo! makes only 60-70 cents. Last month Yahoo! said that a new advertising algorithm that it had designed to close the gap in profitability will be delayed, and its share price fell by 22%, its biggest-ever one-day drop.

MSN is further behind Google than Yahoo! in search, and its parent, Microsoft, faces an even more fundamental threat from the expansionist new power. Many of Google's new ventures beyond web search enable users to do things free of charge through their web browsers that they now do using Microsoft software on their personal computers. Google offers a rudimentary but free online word processor and spreadsheet, for instance.

The smaller eBay, on the other hand, might in one sense claim Google as an ally. Google's search results send a lot of traffic to eBay's auction site, and eBay is one of the biggest advertisers on Google's network. But the relationship is imbalanced. An influential recent study from Berkeley's Haas School of Business estimated that about 12% of eBay's revenues come indirectly from Google, whereas Google gets only 3% of its revenues from eBay. Worst of all for eBay, Google is starting to undercut its core business. Sellers are setting up their own websites and buying text advertisements from Google, and buyers are using its search rather than eBay to connect with sellers directly. As a result, “eBay would be wise to strike a deep partnership with Yahoo! or Microsoft in order to regain a balance of power in the industry,” said the study's authors, Julien Decot and Steve Lee.

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