Case Study
Tech Brand Tie-Ups: Yahoo/Ebay and Google/Dell
by KMF Kamal (26 May 2006)
Risk and Return
The introduction of the Yahoo brand as an advertiser into the Ebay space will inevitably change the brand experience for Ebay customers. To Yahoo, advertisements are an integral part of the experience. Their loyal customers are used to seeing adverts as part and parcel of the search portal and Ebay adverts will be no different. On the other hand, until now, Ebay has not allowed unrelated commercials by outside parties into the search engine used for their marketplace. It is an extremely large risk Ebay is taking. There is no way to accurately assess the impact of such a change to their core brand experience. Will auctioneers and buyers in the marketplace be put-off by what could be unrelated commercialization by Yahoo in their treasured brand space? Only time will tell.
The Google and Dell tie-up reveals a similar story, but not quite identical. Dell is taking a risk by pre-installing Google software, but this is limited. If customers choose to add more functionality, it is of their own choice, and hence the effect on the Dell brand is limited by this independent individual action in case anything goes wrong. Furthermore, the Dell platform as a brand experience is also the entire range of things one can do with a personal computer, and consequently, the target audience is suitably large in accordance. Even with that added advantage, the remuneration for the potential risk to is still worth the $1bn being paid by Google for use of the Dell platform.
Looking at both cases, we can see that the risk Ebay is taking in return for reciprocity appears to be much larger in a straight comparison with Dell. The Ebay platform is prone to interference much more than a traditional computer platform. The element of choice for loyal customers is removed for Ebay; they do not have a say in what advertising they see in day-to-day business. Dell customers can always uninstall the Google software. Ebay customers now have to live with a new brand experience that involves commercials and advertising interrupting their business. If Ebay is not careful, this may end up impacting their brand promise and result in the loss of customers.
In this author's opinion, Ebay should have asked for a different form of compensation. Advertising on search portals can always be bought but core brand equity is priceless.