SAN FRANCISCO - Internet powerhouses Yahoo Inc. and eBay Inc. are joining forces in an alliance that appears aimed at thwarting the recent expansions of online search engine leader Google Inc. and Microsoft Corp.
Under the multiyear partnership announced Thursday, the Silicon Valley companies will draw upon each other's strengths in online advertising, payments and communications so they can connect with even more Web surfers than they already do.
Sunnyvale, Calif.-based Yahoo operates the world's most trafficked Web site with 402 million users and ranks second in the lucrative search advertising market behind Google.
But the deal between Yahoo and eBay seems likely to shift the competitive landscape.
Yahoo will become the exclusive provider of graphical advertising throughout eBay's Web site and will provide some search-generated ads, as well. Yahoo's brand and search engine will also be blended into an eBay toolbar that has been downloaded by 4 million users so far.
Ebay's PayPal service will become the preferred payment provider for purchases made on Yahoo's site, which provides a wide array of shopping, auctions and subscription services.
The Skype service will be used to build another marketing vehicle that will allow advertisers to connect with prospective customers on the phone instead of through their Web sites.
Yahoo and eBay said they will begin testing some of their joint services later this year, but all the benefits are unlikely to be available until next year.
San Jose, Calif.-based eBay boasts nearly 200 million users at its Internet auction site, owns the biggest online payment system in PayPal and operates a thriving voice communications system in Skype.
"We are thrilled to be working more closely with Yahoo! and we think this agreement represents a great opportunity to benefit our communities and grow our businesses," said Meg Whitman, eBay's chief executive officer.
Thursday's announcement, which had been foreshadowed by several weeks of rampant Wall Street speculation, contained no details on whether the two companies are investing in each other.
But both Yahoo and eBay are striving to bolster each other's partnership at a time when their stocks have been slumping as Google continues to expand its lead in search while offering new services that pose new threats.
Meanwhile, Microsoft has vowed to invest heavily in the Internet during the next year, focusing on building a better online advertising platform. As part of its push, Microsoft is dropping ads distributed by Yahoo's search engine.
In recent months, Google has invaded eBay's turf by offering a free classified listing service as well as a payment service. Despite those moves, Google has stressed it has no plans to trample eBay, one of the largest advertisers on its network.
Mountain View, Calif.-based Google dominates Internet search, with a 43.1 percent U.S. market share in April compared with 28 percent for Yahoo and 12.9 percent for Microsoft's MSN, according to comScore Media Metrix.