The promise of Local Search is yet to flower. But the pay-per-call search advertising solution may be just what the doctor ordered.

The pay-per-call advertising model is designed for small and local businesses as well as firms that sell a "high-touch" product or service that can benefit from personal contact. Advertisers bid for phone call leads starting at $2.00 and up. Services offer geographic targeting and provide a dedicated toll-free number in the text ad, which is also used for tracking and billing. Once dialed, the phone rings through to the business' regular phone line. The service also provides a business-information landing page for companies that do not have a website.

Easier Than Pay-per-Click

Pay-per-call is a fairly simple solution compared to the complexity of pay-per-click. Many small merchants have not been able to use pay-per-click advertising, either because they don't have a website or because the pay-per-click bid management tools are just too much to handle. With pay-per-call, these merchants can now tap into the power of the Internet and receive targeted phone leads from customers in their area.

Pay-per-call is in a position to compete with pay-per-click because of broadband penetration and the increase in local searches. Additionally, the 15 to 40 percent click fraud rate makes pay-per-click advertising less attractive. Many small businesses simply prefer telephone to online leads because they are better able to engage prospects for conversion. On the customer side, it's natural to pick up the phone for local shopping. This combination of factors will fuel pay-per-call adoption.

As a result, pay-per-call service providers are working hard to increase distribution partners. This would expand advertiser exposure and spur proliferation of pay-per-call advertising solutions for local merchants and small businesses.

What's the Buzz?

A forum post on SearchEngineWatch says that Yahoo! is testing Ingenio's pay-per-call platform. As reported by Loren Baker of Search Engine Journal, an SEW forum member noticed some Ingenio pay-per-call ads on Yahoo! and then called Ingenio to verify. An anonymous source confirmed that Yahoo! is testing the technology.

A pay-per-call solution would help Yahoo! Local broaden its appeal. Conversely, a partnership with the #2 search engine would be a winner for Ingenio. Distribution partners like Yahoo! already have ready-to-buy consumers who will now be able to connect with thousands of pay-per-call advertisers.

While fairly new, the pay-per-call search platform is rapidly gaining momentum. Ingenio just expanded its distribution network to include Local.com in addition to current partners AOL, go2 and Miva.

Verizon SuperPages launched its Pay For Calls service in October, leveraging the ads in local Verizon yellow pages directories. Verizon spokesperson Dana B. Russell states, "Our bid prices for PFC are the same or higher than industry standards. The percentage growth week over week is about 15 percent."

InfoSpace just partnered with Jambo to offer a new pay-per-call lead-generation service. It's too early for a report here. And you've all heard the rumors that eBay will offer pay-per-call with Skype.

The new local search technology from Interchange (used by Local.com) enables consumers to find local businesses, products, and services quickly and easily. Powered by proprietary and local-web indexing technology, it is designed to deliver highly relevant local-search results to consumers.

The Comeback Kid

With all the speculation on what Ebay might do with its acquisition of Skype, it is quite likely that pay-per-call online advertising could gain national acceptance very quickly. This makes the good old-fashioned telephone the comeback kid. Regardless of the technology approach – VoIP, cell or land phone – the telephone is the new requisite tool for connecting online buyers and sellers.

Since consumers use the Internet as their primary access point for local information, advertisers can now combine web and phone for incoming leads. Pay-per-call is ideal for the local entrepreneur who relies on the phone for customer conversions. Even the mom and pops can tap into the increasing number of consumers searching online for local products and services as well.

Are Conversion Rates Worthwhile?

Ingenio PR Manager Valerie Garing Combs said, "Conversion rates of 1 in 3 incoming leads is consistent with feedback from Ingenio advertisers in several business categories such as florists and cellular providers. Overall, feedback from our advertisers, most of whom have complex sales, is that pay-per-call phone leads convert, on average, 3-5 times better than clicks."

What's the Price Range?

Here, Combs said, "It entirely depends on the category. The median cost across our platform is between $8-$10. But there are hundreds of categories still bidding at the floor price of $2 per call.

Customer Profile

What business categories benefit most from pay-per-call? Ingenio reports activity in categories like high-end travel, cable/satellite TV, financial services and insurance. Verizon reports mortgages, real estate, insurance, home improvement, and attorneys as top categories.

The Proof Is in the Pudding

Here's an Ingenio case study that shows a happy camper with pay-per-call.

Client: Judson Bradley, founder and owner of family-owned and operated Broad Street Flowers, a national floral service headquartered in Atlanta, GA. Broad Street serves the U.S. with a network of 45,000 local florists spread across the country. Though Broad Street has national reach, the company's highly personalized approach has enabled it to successfully carve out a niche from well-known brands like 1-800 Flowers. In fact, Broad Street's personal touch helped it crack the "Top 50" list of national florists within its first year of operation.

Why Ingenio pay-per-call? Bradley advertises 100 percent online, with the bulk of his budget going to Internet Yellow Pages -- an avenue that works well with Broad Street's multiple websites that generate a significant portion of sales from online orders. Pay-per-click didn't work because the keyword bidding/management process was difficult and had no clear way to track ROI. On days when his click ad would run, sales would increase incrementally (he might make $100 more than usual) but this didn't justify the $1,000 monthly spend for the click campaign.

Pay-per-call seemed like a natural fit, given the fact that, in his business, calls are golden. He says, "What really appealed to me about pay-per-call is that very, very few customers call a florist when they are not ready to purchase -- the promise of the incredibly high conversion rates is what really piqued my interest."

Campaign Results: So far, that promise seems to be paying off. Bradley estimates he is able to convert 1 in 3 Ingenio calls -- cutting his spend on customer acquisition by 25 percent. With an average sale of $72, the ROI is clear.

The Revenue Picture

What kind of revenue can providers expect from pay-per-call? As a privately held company, Ingenio is not required to state revenues. However, Kelsey Group estimated that Ingenio pay-per-call gross revenues could reach between $1.4 billion and $4 billion by 2009. Borrell Associates reported that the local online advertising spend grew to $2.7 billion in 2004, a 28 percent increase over 2003.

The potential for future growth is there. According to Kelsey Group, U.S. businesses spend $90 billion annually on local advertising, mostly in traditional media. The trend in advertising spending these days is to shift money from traditional to online marketing budgets, with less radio, TV and print, and more online media. With its effectiveness and excellent ROI, I suspect search marketing will get its fair share.

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