Google to Withdraw Commission from UK Ad Agencies

05 October 2005

Not perhaps the end of the world as we know it - but a nonetheless significant move by one of the globe's most overvalued companies to deprive UK online ad agencies of their inalienable birthright: media commission.

The UK arm of cyber wunderkind Google - whose market value recently topped $84.5 billion (€70.92bn; £48.13bn) - has unilaterally decided to withdraw agency commissions as of January 1 2006.

Instead it will introduce a new system, buzzword-branded as Best Practice Funding, a quarterly payout linked to a sliding scale of billings. Additionally, the dudes from Mountain View, California are demanding schoolmarm-fashion that agency staff meet minimum training criteria.

British cybershops are not best pleased at the Napoleonic stance adopted by Sergey and Larry's heavies. Says Steve Vyse, managing director at London digital shop CVA Media: "My agency stands to lose between £15,000 and £20,000 over the next twelve months under this new arrangement, which is a lot for a small agency.

"Up to now, [Google] paid us 15% commission … which we split … with our customers. We take 7.5% which covers our costs and the bit of profit for running that aspect of the advertising, and they take the rest."

But Nikesh Arora, vp of Google's European operations is unsympathetic: "Agencies could recoup any losses if they grow faster," he argues irrelevantly.

He is also adamant: "We're going to go ahead. We're going to support them however we can. We will give tools and make our resources available. To be fair, there are very few people in the world who give the kind of notice we have," he added.

Neither Yahoo! UK nor rival search engine Lycos plans to change their commission-based agency remuneration systems.

Data sourced from Media Week (UK); additional content by WARC staff