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Pay-Per-Call: Tales from the Trenches

  |  September 23, 2005   |  Comments

Everyone's talking about the pricing model. Who's really using it?

When eBay bought Skype and rationalized the investment would pay off (partially) via pay-per-call revenues, I knew the pay-per-call concept had jumped the shark.

The previous few weeks had brought plenty of news related to the pricing model. When Microsoft bought Teleo, my fellow ClickZ columnist Gary Stein speculated about the pay-per-call possibilities. Microsoft was coy, but acknowledged it was one possible feature it could enable as part of the upcoming MSN adCenter platform. Meanwhile, Google dipped its toe into telecom with the launch of the Google Talk IM client, which could presumably be engineered into part of a pay-per-call platform. Yahoo, too, has VoIP technology built into its IM client. America Online, for its part, is way ahead of the bunch. It already displays pay-per-call ads through a partnership with Ingenio, a small company that's offered pay-per-call since April and now has thousands of advertisers.

When I say the pay-per-call concept has jumped the shark, I mean the acquisitions and related hype have nowhere left to go. However, the reality of pay-per-call, for both media companies and advertisers, has only just begun. That's why I wanted to look into the pricing model. I talked to Ingenio and a few of its advertisers seeking answers to the following questions: How does pay-per-call work for your business? What have you learned so far? What are some pitfalls? What are the choices to be made as the model becomes more widely adopted?

I'm making these inquiries because there's no question in my mind that the model will be more widely adopted. It simply makes sense for a lot of advertisers. Instead of running a search campaign to send people to your Web site, then hoping they dial the 1-800 number on the site, businesses can cut out the site-side middleman. (I'm not saying there's no need for a Web site. It can definitely add to your brand's credibility. But it's not necessarily the best vehicle for lead generation.)

The advertisers best served: local businesses, service businesses, those selling high-consideration purchases, or any combination of the three.

The Attorney

"What I sell is contact with a living, breathing lawyer," notes Frank Frasier of Tulsa-based plaintiffs' law firm Frasier, Frasier & Hickman, an Ingenio advertiser. "That first contact is critical, and pay-per-call provides that."

I don't mean to disparage Frank when I say that he was probably the least sophisticated Internet marketer of those I spoke with. In fact, Frank's lack of interest in the Internet ("I don't operate in a computer world, and many of my clients don't, either," he told me) makes him a perfect example of the kind of local businessman pay-per-call is supposed to attract. Here's a business with no use for the Internet, but one that places great value on the phone call. Frank says he doesn't have time to worry about keywords or maintain creative. In fact, he doesn't actually know what creative is displayed on his behalf. He doesn't care.

"As to what they're posting about me, I'm clueless," he confides. "I'm too busy. I have no reason to complain."

Currently, Frank is paying $10 per call and none of the dozen or so phone calls he's got thus far have turned into clients. But he sees pay-per-call as a vehicle to generate positive word-of-mouth. Call his firm with a legal question -- they have attorneys answering the phones from 8 a.m. to 6 p.m. every weekday -- and he hopes you'll become a friend of the firm. If they can't help you with your problem now, perhaps you'll think of Frasier, Frasier & Hickman when your friend is bitching about a car accident or a slip-and-fall injury. Frank told me an anecdote about a florist he'd helped out with a landlord/tenant dispute.

"I've established a great contact there," he said. "At the risk of sounding cocky, I think that lady likes me and she'd probably recommend me."

The Incorporator

David Clarke markets a business that's all about helping people start businesses. American Incorporators Ltd. helps would-be entrepreneurs incorporate or set up a limited liability company. It's not the easiest service to explain on a Web site. People have questions, and they want to talk to someone in person. That's why American Incorporators has a call center and why pay-per-call made sense.

"We end up talking to a lot of our customers one way or another," David told me. "It seemed to be a natural fit to drive calls to a call center, since we have one."

David's done a lot of pay-per-click (PPC) search marketing, but says pay-per-call is paying off.

"We know that, on a pay-per-click campaign, if you're doing well, you're doing two to three percent [conversion]," he shared. "Right now, our conversion rate on a pay-per-call is anywhere from eight to 10 percent. Even if it was more expensive, which in our particular case it's not, it makes a lot more sense for us to use it."

David's only beef, if you can call it that, with pay-per-call is the categorization system Ingenio uses. Rather than offering bidding by keyword, the company reckons it's easier for companies to bid by category, saving them from the necessity of managing hundreds or thousands of keywords. But David says the category system needs refinement, so his business comes up only when people are looking for incorporation, not when they look for business plans. But David says Ingenio has been very receptive to his requests for refinements.

"As more and more advertisers get in with different lines of businesses they are involved in, the categories and keywords will align themselves," he said.

The Agency

Chris Consorte is president and CEO of Integrated Direct Marketing, a direct and interactive marketing agency on Long Island in New York. He says his firm services everyone from Fortune 500 companies to mom 'n' pop shops. He stumbled onto pay-per-call as a marketing vehicle for his agency, but then the agency started offering it to clients.

Chris says it's worked well for mortgage clients, for debt consolidation players, for home improvement companies, and even for a firm selling commercial bathroom accessories.

"They do very well with it," he said. "It's one of those crazy little fields where you wouldn't think it would work well, but it's worked well."

Where hasn't it worked? The agency tried it for a client selling LASIK eye surgery, and that didn't pay off. Chris figures folks in the market for eye surgery might be older and therefore not as Internet-friendly.

"The audience is probably not ready for it yet," he said.

Chris' concern? Volume. If Frank Frasier's experience -- a dozen or so calls over eight or nine months -- is any indicator, calls are not rolling in.

"I have the clients and bandwidth to accept hundreds of calls," he says, later cautioning other would-be pay-per-callers that just setting aside the budget and putting up the ad doesn't mean the phone will be ringing off the hook. "You have to be realistic that it may not happen."

While Chris is rooting for Ingenio, he expects -- as do I -- the bigger players to soon jump into the game.

"It's my personal opinion that they have something really great, but if they don't move quickly enough, someone else, a company with deeper pockets, with better media contacts and better networks, will come along," he said. "What they're doing can be replicated very easily."

The Implications of the PPCall Gold Rush

After talking with these marketers, I've come up with a list of a few things advertisers and media companies should consider:

  • Categories or keywords, or a combo? Does it make sense for pay-per-call to be sold on a keyword basis or is that too complex for the typical pay-per-call advertiser?
  • Attack of the 800 numbers. This question ties into the one above. If you're doing things on a per-keyword basis does each advertiser get a different 800 number (for tracking purposes) for every keyword? Are there enough numbers in the world to make that possible?
  • Role of the Web site. How best do you use your Web site, or do you even need a Web site, in a pay-per-call universe?
  • Analytics. If ROI is key, and it always is, make sure you have a way of comparing your pay-per-call spending to everything else you're doing. Since the transaction is concluded offline, you need to be able to loop back and figure out whether the investment is paying off.

    It's been an interesting journey talking to folks in the pay-per-call trenches. Are you doing pay-per-call advertising? Have any thoughts to share? Drop me a line if you've got insights.

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    ABOUT THE AUTHOR

    Pamela Parker

    Pamela Parker is a former managing editor of ClickZ News, Features, and Experts. She's been covering interactive advertising and marketing since the boom days of 1999, chronicling the dot-com crash and the subsequent rise of the medium. Before working at ClickZ, Parker was associate editor at @NY, a pioneering Web site and e-mail newsletter covering New York new media start-ups. Parker received a master's degree in journalism, with a concentration in new media, from Columbia University's Graduate School of Journalism.

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