California-based eBay is understood to have begun talks last autumn about a tie-up with the two companies, aimed at muting the growing power of the world’s biggest search engine.

The talks — which are sure to face regulatory scrutiny — are thought to centre on eBay pushing a greater proportion of its $400 million (£225 million) global online marketing spending towards its chosen partner — either Microsoft or Yahoo!. Ultimately, one side could take an equity stake in the other.

Though eBay, which was founded in September 1995, already advertises with the three search engines Google, Yahoo! and Microsoft — and is linked to Microsoft through its MSN service — the bulk of its spending has traditionally been with Google, which accounts for about 42.3 per cent of total search queries.

The relationship had proved fruitful for both, with Google directing its users towards eBay’s buying and sale site. But recently Google’s status as a potential threat to eBay, as its empire-building continues, has become more apparent.

Though Google has officially denied that it is seeking to woo away customers from the auctioneer, it has begun to move into similar areas.

Last year Google launched a new service called Google Base which, like eBay, allows web users to meet online to buy and sell goods and services. The service has already caught on, with around 45 million listings.

Unlike with eBay Google Base customers pay nothing to list their goods.

Google, launched seven years ago, has also launched a payment service to handle credit card processing for customers — like the eBay owned PayPal.

In a further push into eBay’s territory it has also launched Google Talk — a service allowing users to talk to one another over the internet — similar to the eBay-owned Skype.

Yesterday concerns about the threat to eBay helped to send its shares down 4.57 per cent to close at $35.09.

The drop came after firstquarter results showing a slowing of growth year-on-year. The company also failed to raise its 2006 forecast of revenue of $5.7 billion to $5.9 billion.

In a note to clients, one broker wrote: “We are becoming increasingly concerned regarding the sustainability of growth for the company and its ability to achieve expectations in coming quarters.”

Jordan Rohan, an analyst for RBC Capital Markets, said: “The novelty has worn off.”

Consumers, he said, were increasingly comfortable finding things to buy through search engines like Google or on comparison shopping sites.

In contrast Google’s shares soared by nearly 9 per cent at yesterday’s close after the company, based in Mountain View, California, reported a strong set of figures with first quarter net income of $592 million, up from $369 million from a year earlier. Its sales pushed past the $2 billion market for the first time.

David Bradshaw, principal analyst at Ovum, the telecoms and media research agency, said: “EBay is clearly feeling a bit uncomfortable about the fact it is giving all of its money to Google and that Google is beginning to encroach on some of the things that it does as. It knows it is a dangerous situation to be in.”

A spokesman for eBay declined to deny that the group is in talks about a tie-up. He added: “We work with all three of the major search engines.”

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