Pay-per-call, a performance-driven search marketing strategy, has been emerging over the past year.

• FindWhat and telephone-technology firm Ingenio developed a pay-per-phone-call system mimicking the pay-per-click search-advertising model. Ads would elicit a phone call rather than a click-through, enabling companies without a website to lure valuable search engine traffic.
• FindWhat introduced the program as “the first performance-based solution that allows offline businesses to participate in the online paid search world.”
• AOL became “the first major player” to offer pay-per-call. It probably won’t be long before other major portals do the same, as pay-per-call has the potential to shake the search landscape.

This is all good news for America’s small to medium sized businesses without websites. It can also be used to good advantage by firms with complex products and services that require a personal or “high-touch” sales approach to make the sale.

Looking for Industry Growth

The search engine marketing industry had tremendous growth over the past few years, especially in pay-per-click advertising. eMarketer projected a 40 percent growth for 2005 at $5.4 billion. However, as the industry matures, demand is flattening. Having long been underserved, the local search market was identified as a prime target for future growth.

The local market consists of service-based businesses such as attorneys, real estate agents, mortgage brokers, restaurants, beauty shops, tax accountants, plumbers and other independent entrepreneurs. Many of these businesses don’t have websites.

In fact, there are about 14 million small to medium sized companies in the U.S. without websites. So it’s no wonder that Yahoo! is offering a free website to any small business with a physical U.S. location. By integrating these listings into Yahoo! Local search, their users get a better search experience.

Most search portals have a Yellow Pages or Local Search component to provide access to local listings. A few examples are Yahoo! Local and Google Local, as well as AOL Search, MSN Yellow Pages and Verizon SuperPages. These portals get their local listings from Acxiom or infoUSA, which in turn get the data from local regional phone companies.

Researching the Demand

Recognizing that local search left a lot to be desired, Ingenio commissioned a Jupiter study which found that advertisers in industries that provide professional and consulting services prefer phone call leads to clicks 2 to 1. Because of the high conversion rates from phone calls, these advertisers said they were willing to pay as much as 5 to 15 times more for a phone call over a click.

Last year, 25 percent of all commercial searches were for local businesses (Kelsey Group and BizRate). Jupiter reported an increase in local search advertising revenues from $408 million in 2003 to $500 million in 2004. Pay-Per-Call is expected to fuel local search advertising growth in 2005.

How Does Pay-Per-Call Work?

As stated on Ingenio, “Pay Per Call is an advertising service that connects online-search consumers with your business by phone. You don't need a website to participate because Pay Per Call ads which appear in prominent online search engine results and directories, drive business directly to your phone.”

Advertisers identify their keyword phrases, choose from designated categories, and select a geographic area. They create an ad with the company name, address, brief description, and trackable toll-free number that redirects to the firm’s actual phone number.

The trackable number is used for billing the calls. Advertiser bids for placement can run from $5 to $20, depending on the category selection and ad placement. Advertisers can manage budgets and accounts through Ingenio’s secure 24/7 account manager or use a telephone-based interface. Orders and changes can be completed by web or by phone.

The listing includes a title, description and phone number. On AOL, a tiny phone receiver icon on the left distinguishes them from other listings. On FindWhat, the listings are in the right-hand column under the heading, “Call Us Now.” Companies are alerted of a pay-per-call inquiry through a brief announcement before the call is connected.

Besides the basic search engine listing, advertisers get a business information page. This “landing page” contains the business profile and a brief, persuasive message to engage the prospect and encourage the call.

Pay-per-call results are distributed across local search providers, Internet Yellow Pages and vertical directories. Currently, search listings are displayed on FindWhat, AOL Search and Go2 mobile yellow pages. FindWhat’s distribution partners include Excite, MetaCrawler, NBCi, Search.com, and Verizon’s SuperPages.com.

At present, AOL is displaying pay-per-call listings before the sponsored listings and is showing only one pay-per-call listing per page. This may change as volume increases.

The Pros and Cons of Pay-Per-Call

There are many advantages of pay-per-call advertising.

• For businesses without a website, the Internet entry barrier is low. All you need is a phone to achieve a plain-wrap web presence.
• The consumer is in control with a consumer-friendly ad format. It’s much faster and easier to pick up the phone than to rely on email to find out about pricing and product information.
• The human interaction on the phone gives you the ability to close the deal. Most local firms are used to handling business by phone, thus employees are trained in sales techniques. It gives them a chance to differentiate the firm, counter resistance, and make a one-to-one sales pitch.
• A telephone call occurs later in the buy cycle, thus it’s more likely to result in a conversion.
• Research (Ingenio and Jupiter) shows that it’s easier to track on-phone conversion rates than website conversions.
• At present, AOL will display both pay-per-call and pay-per-click listings from the same advertiser. This, including your organic listing, could give you three prominent listings.

There are also a few challenges for pay-per-call advertising.

• You bid for listings by category, and these categories can be pretty broad. Anyone who has submitted a directory listing knows the dilemma of choosing the right category when none are exactly perfect.
• Cost is significantly higher than for clicks. When comparing a phone call to a click, prices are higher and volume is lower. However, conversion rates more than double over clicks, and the average sale is higher. So it’s important to track variables to calculate the ROI.
• The ads display a toll-free phone number that redirects to the firm’s actual phone number. However, it’s more beneficial for both the consumer and the advertiser to display the actual phone number.

Integrating Online and Offline Marketing

Phones seem to be a common thread in more and more online advertising strategies. This contributes to the integration of online and offline marketing efforts. Pay-per-call also has potential to be effective in traditional media. There’s no reason why a toll-free tracking number can’t be used in print and TV ads or across all marketing channels. There’s no respite in sight from the ubiquitously ringing phone. And for merchants, that’s a good thing.

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