Between the Lines: More cuts for commission

Yahoo!'s decision to cut agency commission rates (page 1) will come as a shock to an industry still reeling from Google's decision to scrap its commission system.

But it's easy to see why Yahoo! felt it had to follow suit. Since January (when the Google change kicked in), Yahoo! has in effect been giving away a significant portion of its profit compared with its biggest competitor.

Also, it is to its credit that, unlike Google, it chose to consult the agencies it works with before instigating the changes.

Future market changes mean even larger businesses are likely to see their commission cut this time. From June, MSN searches will no longer run through Yahoo! and the search engine's share of audience looks likely to drop.

Spend on Yahoo! will be cut as a result, which means that many agencies will not make the new commission thresholds.

Not only that, but the move may also impact on spend on search as a medium.

Not all commission is kept by agencies: some is returned to clients, many of which choose to reinvest it in search.