‘Pay-per-call’ ads a good option for service providers

An online ad that yields a phone call: Now that’s counterintuitive. After all, isn’t the point of such advertising to reduce phone time by directing customers to a Web site? That’s true for some businesses, but others–especially service providers–prefer to encourage prospective clients to dial them up.

Say “hello” to pay-per-phone-call, also called pay-per-call. These online ads prompt the user to make contact by phone rather than a Web site. Advertisers pay only when a customer calls. As in pay-per-click, the cost of a pay-per-call ad is determined by a bidding process among advertisers. The higher the bid, the higher an ad appears in its search category.

Some early adopters of these ads report encouraging success with this new model. Consider American Incorporators Ltd. (AIL), a major provider of incorporation services. The company says the sales conversion rate on its pay-per-call ads is 8 percent to 10 percent, compared with 1 percent to 2 percent for its pay-per-click ads.

AIL is a good example of a company for which pay-per-phone-call makes sense. Potential customers may have many questions about its service. To handle them, AIL has a call center staffed with employees experienced in turning callers into clients. It often gets sales leads by phone even though it can sign up clients on its Web site.

“Ours is a business with a lot of questions from clients. If you can answer most questions satisfactorily, the next step to conversion is much easier,” says David Clarke, AIL’s marketing manager. The company uses pay-per-click and print ads to drive customers to its call center; last spring it started its pay-per-call campaign. “It seemed a natural for us,” says Clarke.

On average, a call from AIL’s pay-per-call campaign is more expensive than a click from its pay-per-click campaigns, Clarke says. But because the sales conversion rate is so much higher, the overall cost of those pay-per-call ads is about a third of a pay-per-click ad, he adds.

AIL buys its pay-per-call ads from Ingenio, considered a major player in the emerging pay-per-call market. Ingenio assigns advertisers unique toll-free phone numbers for their ads so that it can track whether one has triggered a call; it charges advertisers a minimum of US$2 per call received.

Ingenio’s chief marketing officer, Marc Barach, acknowledges that pay-per-call is in its infancy. But the potential for growth is immense: The Kelsey Group recently forecast that spending on such ads could reach between $1.4 billion and $4 billion in 2009.

Ingenio has several partners that run its ads, including America Online, which carries them in the sponsored search section of its search engine results and in its AOL Yellow Pages online directory. However, it’s critical for Ingenio to sign up major search engines for its ad network at this early stage of the market before competition heats up. Verizon, for example, began selling pay-per-call ads in October. By mid-November, the company was reporting enthusiastic adoption of the model by advertisers. In late November, Google acknowledged it is testing pay-per-phone-call ads.

“Pay-per-call will be huge. The question is, Who will be the big engine behind it?” says William Leake, CEO of Leads Customers Growth, an online marketing company that recommends Ingenio ads to some of its clients.

Ingenio is actively reaching out to potential partners, but Barach declined to comment on any talks with players such as Yahoo or Microsoft’s MSN. “We have to go where the searches are,” Barach says.