Online Advertisers Turning to Pay-Per-Call
Assoicated Press
Sep 4, 2005 2:41 PM (ET)
By DAVID KOENIG
http://apnews.myway.com//article/20050904/D8CDK0080.html
DALLAS (AP) - Personal-injury lawyer Frank Frasier wants the world to know
about his business but didn't think much of the search-based Internet
advertising that's all the rage these days. Potential clients wouldn't
learn much about him through it, he figured, and he really can't tell if
they have a case without speaking with them directly.
But Frasier's opinion of Internet search advertising changed recently with
the recent arrival of pay-per-call. This technique prompts Web surfers
looking for lawyers in his hometown of Tulsa, Okla., to pick up the phone
instead of clicking an ad or sending e-mail.
"We've gotten about a dozen calls and half turned into cases," Frasier
said. "I'm a believer. It fits my needs."
Pay-per-call could be especially powerful for local businesses that have
ignored the Internet, including those that don't even have a Web site, its
advocates say.
Most search advertising now takes a pay-per-click approach.
Search engines such as Google Inc. (GOOG) auction the right to have a
company's ad display alongside regular search results when a computer user
types certain keywords, such as "Tulsa lawyers." Advertisers pay each time
someone clicks on the ad link.
In pay-per-call, keywords also are auctioned. But instead of a link to
click, the ad directs the user to the telephone. In one version, the user
calls a special number that is forwarded to the advertiser's regular phone.
In another, users type in their phone numbers and get a return call from
the merchant. Either way, the advertiser is billed for the referral.
America Online Inc. and smaller Web portals have partnered with a
pay-per-call pioneer called Ingenio Inc., whose investors include eBay Inc.
(EBAY) and Microsoft Corp. (MSFT)
Ingenio's chief marketing officer, Marc Barach, said the approach is ideal
for small service businesses - florists, lawyers, contractors - whose
customers ask lots of questions.
"They do their business by phone. They probably don't have a Web site, or
if they do it's not transactional," Barach said. "And customers who call
them ... are really demonstrating their intent to buy. They're not just
browsing."
Judson Brady, who owns online florist Broad Street Flowers in Atlanta, said
calls are much easier than clicks to convert to sales.
"You've got a much better chance of closing a sale when you're talking to
them rather than having them look at your site and 10 other competitors'
sites," Brady said.
He estimated that he closes one sale for every 70 clicks but with
pay-per-call, it's one in three.
As a result, pay-per-call ads cost more. Barach said Ingenio's average
per-call charge is $7, compared with about 50 cents per click. Frasier, the
lawyer in Tulsa, said he pays $10 per call.
Analysts say pay-per-call won't replace pay-per-click, partly because it is
much more expensive, but they say it will find a niche.
The Kelsey Group, a market-research firm based in Princeton, N.J., projects
that pay-per-call will become a $1.4 billion to $4 billion industry by 2009.
That would roughly parallel the recent growth of pay-per-click advertising,
which jumped from about $100 million in 2000 to $3.1 billion last year,
according to Jupiter Research.
Advocates say pay-per-call will help address the so-called click-fraud that
threatens to mar pay-per-click advertising. Merchants suspect that some
repeated clicks on their Web links are bogus, generated by competitors and
others only to run up a bigger bill for the advertiser, not to buy something.
Advertisers may believe fraud is less likely with calls because they get a
person on the other end of the line. Ingenio says it uses other safeguards
against fraud, including not charging advertisers for suspiciously brief
calls or repeat calls from the same number.
Still, pay-per-call has its limitations.
Although businesses that now rely heavily on the phone and Yellow Pages ads
might embrace it, the large national advertisers will still prefer clicks,
said Jupiter analyst David Card.
"Nothing ever replaces anything," Card said. "When TV came along, radio
didn't go away. This has the potential to unlock local ad dollars, but
Amazon doesn't want to take phone calls."
Furthermore, those smaller businesses for which pay-per-call is designed
won't feel comfortable bidding on keywords, analysts say. Acknowledging
that possibility, San Francisco-based Ingenio lets merchants cap the amount
they'll pay each month. A competitor, ThinkingVoice, plans to offer flat fees.
While pricing and other aspects of pay-per-call are sorted out, a growing
number of companies see potential profit. One of the latest is Verizon
Communications Inc. (VZ), which recently announced that it would begin
offering pay-per-call ads as an extension of its online yellow pages,
SuperPages.com, in a few weeks.
Verizon has no plans to drop pay-per-click, where it has signed up 37,000
advertisers. Scott Laver, president of Verizon's Internet division, said
Internet traffic is so heavy that there is room for both.
Laver also believes that Verizon's sales representatives, who know local
businesses from years of selling Yellow Pages ads, will give it an
advantage over Internet-only rivals such as Google and Yahoo Inc. (YHOO)
Neither offers pay-per-call, although Yahoo says it is studying it.
Greg Sterling, an analyst at Kelsey, said Verizon's entry will give
pay-per-call more legitimacy and prompt similar support from other phone
companies that, like Verizon, already produce print directories.
And for merchants, it's about dealing with the familiar telephone rather
than the mysteries of the Internet.
"The adoption curve will be fast because it's not something that has to be
explained," Sterling said. "People get it pretty quickly."
================================
George Antunes, Political Science Dept
University of Houston; Houston, TX 77204
Voice: 713-743-3923 Fax: 713-743-3927
antunes at uh dot edu
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