SAN FRANCISCO - Internet powerhouses Yahoo Inc. and eBay Inc. are joining forces in an alliance that further defines the battle lines in an online showdown with rivals Google Inc., Microsoft Corp. and AOL.
Under the multiyear partnership announced Thursday, Yahoo and eBay will draw on each other's strengths in online advertising, payments and communications so they can connect with even more Web surfers than they already do.
Shares of both companies jumped on the news.
Sunnyvale, Calif.-based Yahoo operates the world's most trafficked Web site, with 402 million unique users, and it ranks second in the lucrative search advertising market behind Google. It earned $1.9 billion on revenue of $5.3 billion last year, primarily through online ads.
San Jose, Calif.-based eBay is the e-commerce leader, with nearly 200 million users of online auctions and another 73 million U.S. accountholders of its payment service, PayPal. It earned $1.1 billion on revenue of $4.6 billion last year, mostly by taking a slice of the auction sales on its site.
Thursday's announcement follows several weeks of rampant Wall Street speculation about the mating dance among the Internet's heavyweights. At one point, there was even talk that Microsoft wanted to buy Yahoo.
Coupled with Google's recent $1 billion investment in Time Warner Inc.'s AOL, the Yahoo-eBay partnership also figures to intensify the pressure on Microsoft to find an ally as it tries to become a more formidable player in Internet advertising.