eBay buys millions of search keywords, CEO Donahoe says

The ubiquity of eBay's brand, said CEO John Donahoe, is no accident. Last night at the Fortune Brainstorm Tech conference in Pasadena, Donahoe said his company buys millions of search engine keywords to help drive traffic and sales.

"We're one of the largest buyers of keywords in the world," Donahoe said. "We're also allowing our sellers to buy advertising on Google to help drive traffic to their eBay stores."

The auction and payments giant, which reported earnings Thursday, is making money in ways other than selling new and used items. Online auctions made eBay (EBAY) famous, but buying keywords, ads on Google, and fees generated from PayPal transactions appear to be the future of revenue for the online commerce internet site.

A software program calculates which words eBay will buy based on value and search engines, Donahoe said. The company buys words using many variables, including recent popularity and what time of day folks look for items, to help determine what words to purchase. For example, 'iPod.' "We buy the word every week," he said. "There's probably an 80% overlap each week," in the company's list of keywords.

The when and why words are purchased is performed by computer, he said. "No human intersects with those decisions."

Donahoe also repeated a point he has made previously about growth and revenue at eBay. "PayPal, as a business, will be bigger than eBay," he said at the conference. "PayPal will double in the next four or five years. We're still in the early days of e-commerce. It can easily double in the next 10 years."

Anthony Massucci is a senior writer at DailyFinance. You can follow him on Twitter at hianthony.

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