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eBay makes TONS of money. With a Google auction they could easily generate the capital neccesary to compete with Microsoft's coming search engine and Yahoo's acquisition of Overture,AltaVista and FAST.
The main source of revenue for Froogle will be through adwords. This will proably be the main reason for froogle. Totaly new search, more places to dislay adverts. By making froogle free for sites to list products, this makes the database very large. Large database = acurate and relevant results = more users = more ads shown = more $$$ for Google.