Monday, June 07, 2004

This is an excellent article about the potential convergence of pay-per-click web marketing and pay-per-call web marketing. The key factor is that a telephone call is at least 5 to 15 times more valuable than a click.

I am aware of a few new independent YP publishers that are relying on a pay-per-call model where the advertiser receives a credit on account if a certain number of calls is not generated by the ad.

I don't see this as the wave of the future in print, but online, it could really change the economics of running an IYP

Transforming Clicks
Into Rings
By Bob Tedeschi

Marketers have created the Google empire by paying the company every
time consumers click on an ad. Imagine how much advertisers would pay if
Google and other search engines could get customers to actually call

Herding customers of local businesses to the telephone is the latest
effort of search engines to attract small and medium-size advertisers,
which represent a huge, and as yet untapped, market. According to Greg
Sterling, an analyst with the Kelsey Group, only about 350,000 small
businesses worldwide are using paid search advertising.

In recent weeks, technology companies have begun unveiling new services
to further the effort. The idea behind the services is, simply enough,
to direct customers from search engines to off-line businesses, where
most commerce is actually conducted. The problem is not only that small
businesses typically lack Web sites they can direct Internet searchers
to, but they often lack the expertise or the will to prospect for
customers online.

Sites could encourage calls by highlighting phone numbers with the ads
that run atop or alongside search results, but since Google, Yahoo, FindWhat and others have no way to track a customer's call to the
advertiser, they cannot prove they deserve a fee for helping make the

As an alternative, search engines could adopt the Yellow Pages
approach, where advertisers pay a monthly fee to display a phone number. But
one reason these sites have been so popular with Internet advertisers is
that they charge fees only when a customer engages with the advertiser.
(In online parlance, this is the "pay for performance," or "pay per
click" model.)

New offerings from companies like Ingenio and eStara, though, offer the
search sites a way to tabulate calls generated by searches. Ingenio was
the first to announce an agreement with a search marketing company of
significance, when it signed a deal with FindWhat in April.

The Ingenio service, which is to begin this summer, relies on old
technology: toll-free numbers. When a user types in a search for, say,
plumbers in Tucson, FindWhat's advertisers will display a dedicated
toll-free phone number that Ingenio has secured on the advertiser's behalf.
(Advertisers will eschew Web addresses in their ads.)

When the customer calls the number, Ingenio registers the event and
charges the advertiser whatever fee the advertiser had bid for the right
to appear near the top of the search listings. Ingenio and FindWhat then
share that fee according to a revenue split that neither company would

The buck does not stop there. FindWhat then shares its fee with the
search engine on whose site the ads actually appear (as with Yahoo's
Overture unit, FindWhat exists solely to feed advertisements to search
sites). Advertisers pay Overture a fee so their ads appear alongside search
results on Yahoo and MSN, among others. Likewise, companies pay
FindWhat so their ads can appear near search results on Dogpile, Cnet and
other smaller search sites.

Analysts said that Ingenio's approach was good, but its success relied
on elements that were beyond its control.

"I think it's going to fly," Mr. Sterling, the analyst, said. "How far
and how quickly it'll fly are the questions."

Small businesses have long poured advertising dollars into Yellow Pages
companies and other local media, but those publishers and broadcasters
have local sales agents to pitch the ads and manage accounts. Google,
Overture and FindWhat rely on self-service, where advertisers click
their way through forms to open accounts, and then monitor their ads'

Because many small businesses either have no time or are not willing to
do this on their own, Yellow Pages publishers could be important to
seeding the market for pay-per-call online advertising. FindWhat's chief
executive, Craig Pisaris-Henderson, said he was trying to sell his
pay-per-call search advertising services to Verizon and other Yellow Pages publishers.

Already, FindWhat provides paid search listings to,
Verizon's online Yellow Pages directory.

"They have the assets to really take this to the next level," Mr.
Pisaris-Henderson said.

But Verizon is not ready to commit, said Eric Chandler, vice president
for e-commerce marketing at Verizon Information Services. Mr. Chandler
said local advertisers might not want a toll-free number displayed,
because it might confuse customers - particularly if the number changed
after a period of months, as could happen with the Ingenio system.
"Still, we like the opportunity here," he said of the pay-per-call approach.

Mr. Pisaris-Henderson said he had not yet signed up advertisers for the
pay-per-call program. "But everyone I've spoken to is very excited," he
said. "It'll probably take several quarters before we see any traction,
but once we do, it'll snowball."

Furthermore, Mr. Pisaris-Henderson said he expected that advertisers
would pay considerably more for a call than they now pay for a click.
Ingenio commissioned the Internet consulting firm Jupiter Research to
survey 336 small businesses, and found they would pay from 5 to 15 times
more for someone to call them than they would for someone to click on
their ad and be taken to a Web page.

An Ingenio competitor, eStara, provides an alternative to the
800-number method. In April, eStara began marketing a service to let search
sites present a "push to talk" button alongside search-related ads. When
clicked, the link opens a page that prompts users to type in their phone
numbers, and gives them an option to either talk to the merchant
through the PC or have the merchant call back within a specified amount of

Ian Halpern, eStara's director of marketing, said the company was
pitching its product to the major search companies, "and it's something that
everyone is very interested in."

"It's something people think is the next logical step," Mr. Halpern

It is also a logical next step for both eStara and Ingenio, which have
built modest-sized companies with phone-related Internet services.
EStara's push-to-talk service appears on the Web sites of J. Crew and
Continental Airlines, among many others who use the feature to enhance their sales

Until this year, Ingenio's primary business was, a site that
facilitates calls between consumers and business advisers, psychics and
phone sex operators, among others. The pay-per-call search advertising
service, however, could give Ingenio a toehold in a market that is
expected to generate more than $2 billion in sales this year.

And that was just from selling advertisers clicks, not calls, from
prospective customers, said Marc Barach, Ingenio's chief marketing officer.
In giving local businesses the chance to generate calls from customers
looking for their services, Mr. Barach said, "The market we're looking
to is substantially larger than just targeting a click."


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