eBay is allowing Yahoo paid-search ads to appear on eBay search results in the U.S., according to today's announcement (link).

Let's say I list an iPod on eBay for $19.95 and make it a featured listing. I'd be paying eBay 60 cents in listing fees and $19.95 for the Featured Plus upgrade so my listing will stand out on the search results pages. Imagine how I feel if right next to my featured listing is an ad for an iPod from a Yahoo Search Marketing advertiser that draws people away from the eBay.com website.

Remember, if the shopper chooses to purchase the iPod from the Yahoo advertiser, eBay gets nothing more. If they buy my iPod, eBay gets a Final Value Fee from me.

Yahoo understands perfectly the value of auction listings as a platform for serving up its paid-search product. One year ago, it eliminated fees on its own auction platform and serves up its paid-search advertisements on Yahoo Auction search results. It must be jumping up and down at the thought of putting its ads on eBay.com. This is an incredibly lucrative deal for Yahoo.

eBay will likely say this will be offset by increased traffic by having eBay ads appear on Yahoo. As an eBay seller, I'm not convinced. I've got a call into eBay to see what they have to say.

Will my sales increase because of increased traffic driven by Yahoo, or will my sales decrease because of competing Yahoo ads next to my items on eBay.com?

What do you think?