Whether it’s fashion, technology or commerce, what’s old often becomes new again. Pay per call is the latest revolution in performance marketing, and it focuses on incorporating a 130-year-old technology – the telephone – into the process.
While it’s not a surprise that pay per call is rapidly becoming a preferred model for local advertisers, it’s remarkable that it hasn’t been a significant part of the equation all along.
The rise in popularity of performance marketing, which now represents 40 percent of online advertising revenues, made it inevitable that someone would create a mechanism for businesses that do not have websites to market themselves, according to Greg Sterling, senior vice president at analyst firm The Kelsey Group.
Instead of ads linking to a website, pay-per-call marketing lists phone numbers, often accompanied by phone icons. Merchants pay a fee to the publisher when someone calls after seeing the ad. The number of calls is easily tracked because each ad is associated with a specific phone number, a practice that has been used for many years in print and broadcast ads.
The pay-per-call market, in all forms of media, is expected to reach $60 million this year, and rise by an astonishing 6,000 percent to $3.7 billion by 2010, according to The Kelsey Group. Pay per call enables small and medium-sized enterprises (SMEs) that do not have websites to spread the word and only pay for phone leads.
“Most local businesses don’t know how to deal with clicks,” says Sterling.
He notes that many small businesses complain that understanding and monitoring pay-per-click advertising is too complicated. Approximately 70 percent of SMEs prefer receiving calls to receiving clicks on their websites, according to Sterling, who estimates there are 10 million SMEs.
A survey of SMEs, by The Kelsey Group, indicates that 74 percent of small businesses would pay up to $1 for a call.
The persistent problem of click fraud will also spur advertisers to shift to pay per call, which is difficult to fake, Sterling says. Most companies that advertise in local Yellow Pages are more comfortable with communicating with customers on the phone. Also, two-thirds of SMEs that have websites do not participate in online marketing, suggesting that companies have been reluctant to commit the money and attention to develop leads online.
SMEs also believe that a person who calls is a better quality lead than someone who clicks on a website for information, Sterling says. “If you pick up the phone, you are more buy-oriented than people who are clicking,” he says.
The promise of pay per call has prompted a variety of networks and technology providers to enter the market in recent years, including ADSclick, Jambo, VoiceStar, Miva, eStara and Ingenio. Publishers currently offering pay per call include Verizon’s SuperPages, YellowPages.com, Local.com and Amazon’s A9. Search giants Google and Yahoo are currently testing the pay-per-call model to attract local and small business advertisers.
Microsoft is also working on a click-to-call solution to be included in its Windows Live offering, according to David Cole, a Microsoft SVP and head of MSN and the Personal Services Group.
The click-per-call capability, introduced in mid- March, will let users connect to businesses via Web-based calls by clicking on MSN search links. Last September, just a week after Google launched its Google Talk instant-messaging service, Microsoft purchased Internet-calling startup Teleo to expand the capabilities of MSN Messenger. With the Teleo acquisition, Microsoft also gained click-to-call dialing capabilities that would allow MSN’s upcoming adCenter service to offer pay-per-call pricing.
Dialing for Dollars
Sterling says the potential rewards from pay per call dictate that eventually all publishers involved in local search will incorporate some form of pay per call. “Calls can generate much more revenue than clicks,” he says.
Pay per call is desirable for publishers because companies are willing to pay a lot more for a call than a click. According to The Kelsey Group, the advertising categories willing to pay the most for leads include mortgage lenders ($35), lawyers ($30) and travel agents ($8).
More than 1 billion searches per month are performed on pay-per-call network Ingenio, according to chief marketing officer Marc Barach. Ingenio’s launched in 2004 and has relationships with America Online, MySpace, Miva and Infospace.
Pay-per-call advertisers can decide if they want their ads to reach local or global audiences. Ingenio ad network can specify geographic region, and the company has also implemented IP tracking to determine the consumer’s location, according to Barach.
One potential limitation of the pay-per-call model for publishers is that unlike clicks, which are generated around the clock, call revenue will primarily be generated during business hours. By specifying that pay-per-call ads only run at certain hours of the day (or “day parting”), customers can make sure they don’t receive calls off hours, Ingenio’s Barach says.
The amount that Ingenio’s customers pay for a call depends on the amount that competitors are willing to pay. Taking a page from the SEM model, Ingenio’s auction model charges one cent more than the next highest bid at the time the call was placed. The company sets prices based on categories, not keywords to simplify the model. The minimum charge for a call is $2, which is the case for many categories.
David Clarke, the marketing manager for American Incorporators Limited of Wilmington, Del., began placing pay-per-call ads on America Online one year ago, and is happy with the results. “The biggest advantage is that those who call are a lot further along in the decision-making process and are more serious than people who click,” he says.
Clarke pays between $15 and $18 per lead for calls requesting information about AIL’s services for forming corporations, and approximately 10 percent of those calls result in a sale.
Publishers will have to weigh the potential revenues to determine if ads that generate money from calls or clicks get top billing. Where they are available, the higher-priced pay-per-call ads seem to get preferential treatment, getting the prime spots on AOL and YellowPages.com.
Pay per call is a “small but growing portion” of Ingenio’s overall revenue, which was $83 million in 2005, according to Barach. Ingenio has deals with networks Performics and Miva to promote pay per call, he says.
While pay per call has promise, it will not overtake traditional ads in search marketing, according to Mike Kerans, a senior vice president at Miva. Pay per call is appropriate for selling complex goods such as financial services, travel and “high-ticket items” like flat screen TVs, but because of the higher premiums charged, “I wouldn’t use it if I were selling ink cartridges,” Kerans says.
Pay per call will grow in popularity for the 25 percent of searches that are local, but national ad campaigns will continue to rely on other models, according to Kerans, whose company began offering pay per call in late 2004. “It’s never been that new media completely replaces old media,” notes Kerans, adding that pay per call is an effective way for small businesses to dabble online, as only one in three have a website.
Miva works with local TV stations, newspapers and larger publishers, including Verizon’s SuperPages and Infospace in the United Kingdom, and recommends that advertisers include a telephone icon to distinguish listings from pay-perclick ads, Kerans says. Companies should also use landing pages with maps to show the proximity to the customer, or promote special offers to induce people to call, he says.
Kerans says publishers have to determine how much ad space to give to pay-per-call versus payper- click ads based on the cost per thousand (CPM) that they expect to receive.
Calling All Clicks
An alternative form of pay per call enables consumers to prompt a phone call from the advertiser by entering their phone numbers online. Click-to-call technology was originally used to provide customer service, and automatically connects the two parties when consumers click a button. Click-to-call work can be financed through a pay-per-call model when applied to advertising, or through a flat fee or volume pricing.
Using click to call for sales enables customers to continue with their online sessions without having to stop to dial the phone, according to John Federman, CEO of eStara, which offers click-to-call and pay-per-call services.
While pay-per-call advertisements require unique phone numbers that identify the referring publisher, eStara’s Web-initiated calls save money by requiring only tracking numbers for each publisher, according to Federman. Using “cross-channel data passing” technology, the customer’s information is automatically forwarded to the advertiser’s call center, where sales representatives can view it on their screens. eStara customizes the pricing for each publisher, offering auction as well as flat pricing and subscriptions.
Click-to-call technology is also being used on commerce websites to prompt customers who are idle on a website. For example, after a shopper is browsing a website for a few minutes and stops clicking, a pop-up window offers customers the chance to talk with the merchant live to complete their order or to ask for more information, Federman says.
Some people aren’t anxious to fill out forms or give credit cards or social security numbers online,” according to Federman, whose company provides click-to-call services for Amazon, DaimlerChrysler and Continental Airlines. Federman said that after switching from formbased leads to click to call, DaimlerChrysler cut its conversion time from 30 days to four days or less, and doubled its conversion rates.
Search engines and local publishers of Voice over Internet Protocol (VoIP) technology reduce the cost of click-to-call phone connections, Federman says. Consumers using dial-up connections may be hesitant to go offline to call an advertiser, but click to call using VoIP enables them to instantly converse online. Technology developed by eStara automatically checks to see if the consumer’s PC has a microphone, and if so, launches a VoIP window.
While clicking an ad to talk live with someone is a “lower barrier to action than picking up the phone,” according to The Kelsey Group’s Sterling, consumers are not yet comfortable with making calls through their computers.
However, the rise of inexpensive VoIP services from Skype and Vonage could change consumer perception. “When VoIP is mainstream, you may start to see ads with phone icons (that initiate PCbased calls), but that is years away,” Sterling says.
JOHN GARTNER is a freelance writer in Portland, Ore. He is a former editor at Wired News and CMP. His articles regularly appear on Wired.com, Alter- Net.org and in MIT’s TechnologyReview.com.