eBay's Ad Network Ready to Launch (EBAY, GOOG)

eBay Inc. (Nasdaq: EBAY) is all set to start its own keyword based advertising platform for web publishers called AdContext. The program, which will be similar to Google Adwords, will allow website publishers to run ads generated by eBay.

So, if you have a site about Microsoft’s Xbox, eBay’s AdContext will show auctions on Xbox. However, unlike Adsense where publishers get paid per click, eBay’s program will only pay if the person wins the auction.

Currently, eBay is not only a major competitor of Google but is also one of Google’s biggest customers. Try typing in ‘xbox’ in the Google search engine and you will see an ad from eBay. eBay does generate a good amount of traffic from Google but by starting its own advertisement network it will probably save tons of money. This is a clear message to Google that eBay is ready for a fight. Google has been encroaching into eBay’s various business units like shopping.com, Skype, Paypal and also Craigslist (eBay owns 25%). I doubt eBay completely opts out of Google’s Adwords program because it still needs Google’s search engine to generate traffic for eBay.

I see this as a big way for web publishers to monetize their sites and would be interesting to see how many sign up for eBay’s AdContext. One thing to consider is that Google doesn’t allow competing advertisement services to run on the same page. Since eBay’s ads are not competing with Google’s, will they allow publishers to run eBay’s ads on their pages?

I think its clear that eBay will keep on expanding into new services and maybe its time for us to add eBay into the ‘Big Three’ and start calling it the ‘Big Four’.

Full Disclosure: I own shares of eBay.