Friday, August 06, 2004

Pay-per-Call Gaining Momentum
by Ross Fadner

Search marketing firm Ingenio Inc. is set to roll out its new pay-per-call platform through distributor in the coming weeks.

Although industry insiders see big potential, many expect a bumpy road along the way.

Pay-per-call looks like an effective tool for local search advertisers, despite the need for awareness of the new platform among distributors. Search marketing firm Ingenio Inc. is one of the first technology enablers of the new platform, which will be launched by distributor in the coming weeks.

According to market research firm The Kelsey Group (TKG), 98 percent of the roughly 22 million businesses in the United States fall into the category of small- to medium-sized enterprises (SMEs), precisely the kind of businesses large firms like Overture, Google, and FindWhat are trying to target with their local search offerings. Not only that, but most of the business conducted by these advertisers can be categorized as local, too. TKG research indicates that 80 percent of SMEs make 75 percent of their product buys and/or sales within a 50-mile radius of their location.

This would indicate that there should be a sizable market for local search out there. Despite this, TKG reports that there are only 350,000 advertisers participating in paid search globally. Why? Well, 70 percent of SMEs don't have a Web site, a fact which has excluded many local businesses from doing search advertising to date.

Pay-per-call is one possible option for these Web-shy advertisers. With pay-per-call, advertisers only pay publishers when their ad results in a phone call to their businesses. Ingenio measures this by granting each of its advertisers a customized 1-800 number which it tracks to determine the number of calls in order to accurately charge its advertisers.

As with paid search marketing, advertisers bid for placement, but through Ingenio, they bid on categories rather than keywords. Once FindWhat implements the program later this month, Ingenio will create business profile pages for merchant advertisers providing basic information like location, operating radius, and maximum bid amount per category.

However, hosted contact pages are nothing new; Overture also offers this through Local Match.
Neal Polacheck, senior vice president of research and consulting at TKG, noted that measuring the number of calls generated by Internet Yellow Page-listings is nothing new, but believes that Ingenio excels in its ability to deliver performance that's entirely relevant to advertisers' needs, in the form of calls instead of clicks - or even print references. To the local advertiser, he said, "giving out 5,000 phone calls -- that's true performance."

In a February report, JupiterResearch reported that through 2008, local search advertising growth will be slower than online advertising overall, but that pay-per-call could be a wild card with the potential to change the growth curve.

Yet the real issue is generating awareness. As Jupiter analyst Niki Scevak wrote in his Web log, "Even in the most optimistic scenario though, (widespread adoption of pay-per-call) will still take time." He added that SMEs and distributors may face obstacles early on. "Both FindWhat and Ingenio will struggle to hold on to margins just like Overture did when it pioneered paid search through deals with Yahoo! and MSN."

Marc Barach, Ingenio's chief marketing officer, believes that the demand for pay-per-call is out there, and contended that most SMEs have an ad budget but don't use it, spending less than one percent of gross sales on advertising. The trick will be getting these businesses online, he noted.
According to Polachek, it may take publishers a while to warm to the idea of pay-per-call because there's no existing precedent. He said the new platform will certainly have an impact on pricing, especially by category, and that publishers will need to be selective about which advertisers they make the product available to.

Although Ingenio will be the first to offer pay-per-call, insiders say InfoSpace's interactive Yellow Page-sponsored listings unit, Switchboard, is also currently working on a similar platform. Switchboard declined to comment on the new product.

MediaPost Communications


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