This makes eBay potentially the biggest single user of AdWords, Google's advertising system that shows adverts based on words in web searches and the biggest money-spinner for the internet search engine.

Disappointed

"This is part of an ongoing experiment to look at how we market across all media channels," said eBay spokesman Hani Durzy.

But he admitted the company were disappointed over Google's plans to host a rival function in an attempt to build market share for its Google Checkout payments service, which was launched in the US last year and became available in the UK in April.

"We don't view that kind of activity as an appropriate activity for one partner to do to another," he said.

Google hoped to alert PayPal users who would have been in Boston attending the eBay Live annual seller event to its own service, according to market experts.

It could also have been seen as part of an effort to get eBay to accept Google Checkout, currently banned on the online auctioneer's site.

But in a contrite manner, Google cancelled its rival function a day before it was due to happen and stated on its blog: "After speaking with officials at eBay, we at Google agreed it was better for us not to feature this event during the eBay Live conference."

Empty threat?

Analysts believe that after negotiations, eBay will once again be advertising on Google, which accounts for more than 50% of search queries in the US and 80% in Europe.

"It was a clever-dick marketing tactic from Google that has gone wrong," Ian Maude, analyst at media and telecom consultancy Enders Analysis, told the BBC.

"EBay is the dominant player in the online payments market with PayPal and they have reacted very badly to the stunt, feeling that Google is trying to park their tanks on their lawn."

He said eventually this battle will be resolved, but added: "There certainly will be other conflicts as the industry consolidates in areas such as digital advertising and others."