Under the deal, which will go into effect in the second quarter, FairMarket clients can list items for auction on eBay's site. Previously, Woburn, Mass.-based FairMarket had set up a network of auction sites to compete with eBay.
It's a "major capitulation" by FairMarket and its partners, said Keenan Vision analyst Vern Keenan.
"It's a smart move on FairMarket's part to go where the action is," Keenan said. "They were beating their head against the wall in terms of finding buyers."
The two companies declined to give any financial or marketing-related details of the deal.
Already the dominant player in the online auction market, eBay has been gaining strength against its rivals in recent months. Yahoo, eBay's leading competitor, saw its listings plummet after introducing fees on its auction site last month. And start-up auction site DutchBid.com saw its planned merger with Gold's Auction fall through earlier this month.
Meanwhile, eBay's listings have largely remained stable, and the company has been aggressively expanding its services in the United States and abroad, despite a fee increase.
The company recently launched a joint auction area with online services firm eLance. Last month, the auction giant bought a stake in South Korea's Internet Auction for $120 million.
FairMarket launched its auction network in fall 1999, teaming up with Microsoft's MSN, Excite@Home and Dell Computer. The sites in the network share listings and bidders.
Despite the hype and big-name players, the network never reached eBay's stature. Lycos, a member of the FairMarket network, has about 230,000 auctions, according to Downtown Magazine, which tracks listings at several auction sites. eBay has about 5.4 million listings.
FairMarket will continue to host its auction network, and FairMarket clients will have the choice of listing items on the network or on eBay. Home shopping company ValueVision International will be one of the first FairMarket clients to list on eBay, but others could follow.
Many FairMarket clients still want to have their own branded sites, company representatives said. But the move by the company to link its clients with eBay will allow FairMarket's clients to tap into eBay's huge network of bidders, they said.
"FairMarket has been all about helping merchants get their products out in front of different buyers," said Mark Sutton, product marketing manager at FairMarket. "This helps extend that notion. We're putting those products in front of buyers in the biggest marketplace online."
FairMarket charges customers to host their auction sites and charges a percentage fee on transactions conducted through them. For transactions on eBay, Fairmarket will tack on a percentage fee on top of eBay's listing and closing value charges.
In linking with eBay, FairMarket has signed a deal to license eBay's application programming interface. FairMarket will offer clients a service that will link their inventory management systems with eBay's listing services.
"We're really pleased," said eBay spokesman Kevin Pursglove. "From our perspective, this will bring a whole new bunch of merchants to eBay's site and will attract a new batch of customers."
In moving to enable its clients to offer their items on eBay, FairMarket will be stepping into an already competitive field. Companies such as Andale, GoTo Auctions and AuctionWatch.com already are offering services that link small businesses and individual power sellers to auction sites such as eBay and Yahoo.