Why eBay's deals stoke Google-Yahoo investigation fire -- less competition among friends?

Just when the DOJ is investigating if the Google-Yahoo ad partnership is anti-competitive, eBay bursts onto the antitrust stage with "investigate us too!" acquisitions of Bill Me Later and more classified ad businesses. (See NYT article  and post, and WSJ article for excellent background.)

Why are the eBay acquisitions relevant to the Google-Yahoo investigation? 

First, they spotlight how dominant and incestuously interdependent the primary Internet players are.

• eBay outsources its search to Google outside the U.S. and to Yahoo in the U.S. -- so the Google-Yahoo ad partnership would make eBay even more interdependent with Google than they are now. (See "Googleopoly II" white paper, section IV.A "Cartelization of competitors into financially dependent 'partnerships'.")
• This is highly relevant to the state of online cartelization because:
  • eBay has 95% of the online auction market per Jupiter research, and eBay's Paypal unit is the dominant online payment provider.
  • Bill Me Later, which eBay just bought, is Paypal's leading competitor in this online market.
    • According to the WSJ article, eBay's customers are already concerned that eBay's plan to require/tie customers to using Paypal for their eBay transactions would have even less choice with eBay controlling the Bill Me Later competitive option as well.
  • The plot thickens further. Remember that Google launched its free Checkout application to compete with Paypal, but eBay threw such a tantrum that Google backed off and they remained more 'friends and partners' than competitors.
    • There is strong evidence, if the DOJ or State AGs choose to explore it, that Google has pulled back in its planned Internet payment competition with eBay, because it did not want to lose eBay's search traffic.
    • Seems Google and eBay are too interdependent in their search advertising partnership to compete fully in Internet payments.
      • Sound familiar? This is the same point I make in my case in my Googleopoly III white paper, where I argue that the Google-Yahoo deal would make Yahoo too financially dependent on Google to expect Yahoo to compete as vigorously with Google after their deal.

Second, the interdependent incestuousness of the Internet market is further exposed when you look at eBay's rollup/consolidation of the classified ad business.

• The NYT article explains that eBay's rollup of the classified ad business now generates $260m in annual revenues, "which it described as three to four times the estimated annual revenue of the closely held Craigslist," which eBay also happens to own a stake in.
  • eBay is effectively cartelizing the classified ad business much the same way Google is effectively cartelizing search advertising.
• In the context of the Google-Yahoo deal, Craigslist is one of the top webistes that already outsources search advertising to Google, along with AOL, ASK.com and Amazon.

Third, the interdependent incestuousness of the Internet market is exposed yet again when one connects the dots that Bill Me Later is currently aligned with Amazon, which has a 10% ownership stake and is fully integrated with Amazon's site.

• Since Google provides search to Amazon and eBay and Yahoo provides search to eBay in the U.S. -- these companies are interdependent. (Amazon's CEO was among the earliest investors in Google.)
  • What will be of interest to the DOJ and the State AGs is if eBay and Amazon, tacitly agree to a competitive truce among Internet friends, like the obvious competitive truce between eBay and Google over online payments.

Bottom line. 

• The Internet is exceptionally interdependent to the point of incestuousness. It is not a fully competitive market.
• This interdependence encourages the dominant Internet players to divide the Internet market up among themselves and focus their competitive energies outside of the Silicon Valley incestuous family of companies who don't like to compete fully against one another.
• Ironically, eBay's CEO John Donahoe threw fuel on this investigative fire yesterday in bragging to investors: "This is the time that strong companies can get stronger."