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The deal consists of four main components - search and advertising, a co-branded toolbar, online payments and a possible 'click to call' tie up.

Under the deal Yahoo! will become the exclusive third-party provider of all graphical advertisements throughout the eBay.com site. It will also provide sponsored search for complementary products on some eBay.com search results pages. Although Yahoo! might have pushed to put sponsored links on the eBay auction pages themselves, eBay will have balked at putting directly competitive ads against its own customers.

Yahoo! and eBay have also agreed to develop ways to extend Yahoo's Web search results for eBay.com and to provide Yahoo! search users with up-to-date listings from the millions of products in the eBay.com marketplace. Currently eBay spends millions of dollars on Google and the other search engines buying generic listings on sponsored links. eBay is keen to get a higher exposure of actual products available through its lists.

Yahoo! has also agreed to accept and promote PayPal payments for products and services throughout the Yahoo! properties. PayPal, which has 73 million

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accounts in the U.S., also will be deeply integrated on the Yahoo! site and will receive prominent positioning when users purchase Yahoo! services across its network.

This offering will provide Yahoo! consumers with additional online payment choices and the option to use PayPal across the entire Yahoo! network. The agreement takes PayPal another step forward in becoming the de facto Internet banking service and will provide an additional bulwark should Google launch its much rumoured PayPal competitor Google Money.

Additionally, the companies have agreed to jointly develop a 'click to call' service which would allow Skype (an eBay subsidiary) and Yahoo Messenger with Voice customers to click on an ad for a product and make a direct call to the merchant to make a purchase.

Finally, eBay will integrate Yahoo! Web search functionality and Yahoo! site links, including the Yahoo! Home Page, Yahoo! Mail and My Yahoo! into a co-branded version of the eBay toolbar. eBay says that its toolbar has been downloaded by more than four million of its users so far.

Rumours that eBay was looking for a search partner surfaced last month. At the time, it was suggested that the auction site was courting all three major search engines, although Google was almost ruled out as it has released a number of competing products in the past year which encroach on eBay's markets.

eBay is seen as important as it is one of the last big sites with a huge audience which has remained untouched by one of the big three search engines. Once again, Microsoft will be unhappy to have lost out as it lost out to Google in a bidding war for AOL at the end of last year.