San Francisco-Based Company Introduces Pay-Per-Call Advertising

Is a phone call better than a click Pretty soon advertisers will be able to make the final call on that question.

Ad developers are pushing a new type of paid search ad dubbed "pay-per-call."

The technology for pay-per-call was actually introduced in April by Ingenio, a San Francisco-based company that develops technology for delivering online ads.

Five-year-old, privately held Ingenio has 90 employees and expects 2004 revenue of $65 million to $70 million, says Marc Barach, chief marketing officer. He says its been profitable the last seven quarters.

Barach says Ingenio has received a patent for the main technology that enables pay-per-call. It deals with call- switching software and hardware that track and route 1-800 calls made by consumers to advertisers.

In paid search, advertisers pay companies like Google to place their ads prominently on their results pages for specific search terms.

The main type of paid search involves pay-per-click ads. Thats where advertisers pay a certain amount each time someone clicks on their ad.

Pay-per-call takes that idea one step further. Heres how it works: Advertisers pay a certain amount only after a user dials the 1-800 number that appears with the ad. In theory, advertisers will be getting an even more interactive response than if someone merely clicks on their ad.

Pay-per-call ads are currently in the process of being tested. The target market appears to be mostly small businesses. The ads will be programmed to appear in local searches, which target a specific ZIP code. Local search is a quickly developing market.

Advertisers will have to pay more per call than per click, but if the pay-per-call ads provide a better lead than the pay-per-click ads, developers and analysts alike expect the market to really take off.

Jupiter Research says U.S. advertisers will spend $3.2 billion on paid searches in 2005, up 23% from an expected $2.6 billion this year, so a lot of advertising dollars could be at stake.

Developers think bigger companies will also use pay-per- call, if they see small businesses having success.

"The customer sees the ad, calls in and the call is routed through our software and hardware to the advertisers phone," Barach said.

Advertisers know who called, where they called from and how many calls were made by any caller.

Ingenio has just completed most of the testing on its pay- per-call technology, and the first big distributor is signed up.

Barach says Internet marketing company FindWhat.com of Fort Myers, FL., is promoting the ads with clients.

FindWhat runs online ad campaigns and places ads for clients on search engine networks.

Spokeswoman Karen Yagnesak says FindWhat is starting to distribute pay-per-call ads on hundreds of search engine and portals, including Terra Lycos and Verizon SuperPages.com.

FindWhat says interest is "strong," but it wont say how many advertisers its signed up for pay-per-call.

Barach says pay-per-call gives small companies a "bigger bang for their buck." These companies cant afford to waste advertising dollars trying to get clicks that dont lead to sales, he says.

Phone calls give companies a much better chance of making a sale, Barach says.

Another plus for small companies is that pay-per-call doesnt require that they have a website.

According to researcher Kelsey Group, 70% of small and midsize U.S. businesses dont have a website.

"Pay-per-call opens Internet advertising to millions of businesses that wouldnt otherwise participate in it," Barach said.

In the case of FindWhat, advertisers will bid to get placed in the results of certain search terms.

Thats a method commonly used with pay-per-click as well. FindWhat expects that the minimum price will be about $2 per call, much higher than the pennies, that advertisers pay per click.

FindWhat says there will be no extra charges for multiple calls from the same consumer made within a 10-day window.

In addition to paying $2 per call from a consumer, FindWhat might charge advertisers up to 10 cents for each minute they talk after the first, free 10 minutes.

FindWhat is waiving the 10-cent charge for now to encourage advertisers to try pay-per-call.

Personally, I love the pay-per-call idea! If someone is willing to pay $2 for a telephone call, I would say thats a pretty solid lead.