British interactive agencies have expressed alarm as the grapevine continues to reverberate with rumours that Yahoo! is poised to emulate Google and raise the spending hurdle that governs its commission rates.

In January world number one search engine Google slashed the traditional 15% UK agency commission to a minimal level, at the same time imposing a raft of other conditions [WAMN: 05-Oct-05].

Yahoo! currently pays 15% on annual spend of £50,000-plus, ($87,485; €71,288) reducing to 10% on spend above £3,000. But from June 1, the world's second-largest search engine is expected to cut those amounts to 5% on expenditure of £20,000-plus and 10% on budgets over £80,000.

"Clients will continue to spend on search marketing because it is the most cost-effective form of online advertising," comments Warren Cowan, ceo of specialist interactive agency Greenlight, whose remuneration is not commission-based. "But a lot of agencies which are funding their activity by commission kickbacks will feel the impact."

The global search engine ad sector grew from £800m in 2002 to £2.6bn in 2005. But the immensely profitable US search engines have always felt pain at paying commission to online agencies in the UK - a practice unknown stateside

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