The deal, between the world's largest internet media company and the world's largest e-commerce player, is designed to boost their positions against Microsoft and Google, and confirms recent speculation that the pair would work on partnership projects.
The agreement consists of four major components in the areas of search and graphical advertising, online payments, a co-branded toolbar and the opportunity to explore "click-to-call", which provides a link inside an advertisement that allows consumers to contact the advertiser directly to pursue products.
Yahoo! will become the exclusive third-party provider of all ads through the eBay auction site.
In return, Yahoo! has chosen eBay's online payment system PayPal to allow its own customers to pay for Yahoo!'s services.
In addition, Yahoo! will gain access to eBay's base of online shoppers when they begin to roll out their joint initiatives this year.
Terry Semel, chairman and chief executive officer of Yahoo!, said: "Our consumers will benefit from the combination of Yahoo! and eBay's leading technology and services, providing them with one of the best online experiences.
"Yahoo! holds a leadership position in all forms of online advertising. This partnership with eBay provides us with a great opportunity to further extend our sponsored search and graphical advertising reach to one of the largest and most active communities on the web."
The rolling out of the initiatives will include a testing phase that will take place over the next several months, with a plan to achieve full implementation in 2007.
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