Top eBay sellers get crack at banner ads

The leading online auction site has begun selling the ads to some of its top sellers and plans to expand the program to those particular sellers in the next month. The sellers' ads will appear on the company's search results and category listing pages.

"This is a response to a pretty steady inquiry from sellers," eBay spokesman Kevin Pursglove said. "They liked the idea of building a brand within eBay itself."

Pursglove declined to say how much the ads will cost, saying only that the rates would be competitive with those paid by outside companies who market on eBay.

The new ad program comes as online advertising in general and banner advertising in particular have come under heavy scrutiny. Many online companies such as Yahoo have seen their revenues fall as advertisers have reined in online advertising budgets. In response, many companies have embraced new advertising formats such as pop-under and super-sized ads.

In contrast, eBay, which gets the bulk of its revenue from listing and transaction fees on its auctions, has seen an upsurge in advertising on its site in recent quarters. In its latest quarter, ads accounted for about 5 percent of the company's revenue.

eBay began selling banner ads on its site last year, in conjunction with America Online. AOL's sales force sells the actual ads, and the companies share the revenue.

The arrangement drew criticism from longtime sellers, many complaining that the ads did little to encourage bidding but instead took potential bidders off eBay.

The new ad program is designed in part to respond to those complaints, Pursglove said.

"There was a sense very early from many power sellers that if we are going to open up space (for advertising) then we should allow banner ads for them," he said.

Only so-called power sellers, which have to sell a minimum of $2,000 a month through the site and maintain a 98 percent positive feedback rating, will be eligible to purchase ads under the new program. eBay will not expand the ad program to other sellers until next year at the earliest, Pursglove said.

The San Jose, Calif.-based company began testing the ads with a select number of power sellers in the last month, Pursglove said. eBay plans to open the program to all power sellers within the next month, he said.

Although outside advertisers can link to their Web sites through their banner ads, eBay will only allow sellers to link to their eBay storefronts or their personal pages on eBay. Since late last year, eBay has been trying to restrict deals made by sellers off the site.

At least one eBay power seller said he has no plans to buy the banner ads.

"I don't know who is going to use it," said Bob Miller, who sells stamps and postcards on eBay. "Everything I've seen says that banner ads are a waste of money."

eBay is working with Amazing Media to help design and sell the power seller ads, Pursglove said.

eBay has promised Wall Street that it will hit $3 billion in revenue by 2005, which would require 50 percent growth per year until then. In that vein, the company has been exploring a number of ways to increase revenue.

However, eBay expects the new ad sales will not have any immediate "material" effect on its revenue, Pursglove said.