With Google's Formal Entry, Pay-Per-Call Set to Grow

Google announced last week that it would launch click-to-call ads with partner eBay next year in a deal that will be monetized through a performance-based, pay-per-call model.

That implementation, though still a long way off, will mark Google’s first real foray into pay-per-call ads and could provide a shot in the arm for the nascent ad model. It also gives Google a bigger toehold in non-Internet media, since pay-per-call can be used in podcasts, radio, free 411 services, outdoor media, or anywhere a unique phone number can be placed.

“Google can bring pay-per-call into the mainstream the way no one else can, except maybe Yahoo,” Greg Sterling, analyst at Sterling Market Intelligence, told ClickZ. ” It won’t be long before it is established as a side-by-side model with clicks. Most people selling clicks will sell calls, either in tandem or as a substitute for certain kinds of advertisers.”

A large addressable market prefers to do business through phone calls instead of clicks on a Web page, according to Sterling. Small mom-and-pop businesses immediately come to mind, and they’re indeed the primary market for pay-per-call. But large corporations with local brick-and-mortar stores, dealer-based businesses such as auto sales, or national and regional franchises often prefer calls to clicks, he notes.

“There’s something more accessible about the telephone. They understand how to close leads on the phone, but the learning curve for online marketing is beyond the capabilities of a lot of businesses, who are occupied with day-to-day business,” Sterling said.

According to the latest Kelsey Group research, pay-per-call revenues in the U.S., both on- and offline, are expected to grow to $3.7 billion by 2010. While much of the growth is expected to be driven by local advertisers buying directly, more and more agencies, including media buyers and SEMs, are interested in buying pay-per-call ads for larger clients.

Confusion abounds in marketers’ minds, due to the various implementations of Web-to-voice marketing models. There are two flavors of click-to-call, the call connection infrastructure, each of which may or may not include pay-per-call, and the billing model layered on top.

One click-to-call model connects users and advertisers via traditional phone service. A user clicks the ad and enters their phone number on the Web. Google tested that model last year, and it’s currently in use by several publishers and click-to-call vendors, including Superpages.com and eStara, Yellowpages.com and Ingenio, and Microsoft’s Windows Live Local.

A second click-to-call model uses VoIP (define)to connect a user directly to the advertiser through the user’s pre-existing VoIP application. This is what Google and eBay plan to do using eBay’s Skype and the Google Talk VoIP applications. It’s also used by Ingenio and eStara for some clients.

A drawback to VoIP-based click-to-call is the barrier created by requiring additional software to be installed, and for the user to change the habit of using a telephone to make a call, said Marc Barach, Ingenio’s CMO.

“When you get to a subset of users looking for a service like a plumber or financial advisor, they’re very goal-focused. They’re concentrating on what they’re going to say to the person on the phone; they’re not interested in navigating a new Internet experience,” Barach said. “We don’t want to create friction and risk losing a customer for the advertiser.”

Ingenio is looking forward to the day when VOIP becomes widely adopted, Barach said, but the company’s able to operate without it. To prepare, Ingenio moved last year to a VoIP-based infrastructure. When the market is ready, the company will launch a customer-facing VoIP front end, he said. While widespread adoption is a few years out, it will come sooner now that Google’s involved, with Yahoo and Microsoft likely to be far behind, he added.

Companies are beginning to use click-to-call in more creative ways, according to eStara CEO John Federman. eStara client Jenny Craig puts click-to-call links on its Web site and in e-mail. When a user clicks on the link to initiate a call, a recording of spokesperson Kirstie Alley plays, congratulating the user on their choice and passing the time while the system finds the nearest Jenny Craig location. The local store’s phone rings, and they hear a message from Alley identifying the call’s source, and the user is connected.

“Click-to-call can increase sales conversion rates, extend and deepen the brand experience, and localize leads,” Federman told ClickZ.

Some marketers are also using click-to-call proactively instead of passively by putting a button on a page, or setting triggers in lead generation forms, credit applications and shopping carts inviting users to initiate a click-to-call session if they abandon the process without converting, he said.

Pay-per-call can be used in conjunction with one of the click-to-call models, as Google plans to do, or it can be implemented online or offline without the click-to-call element. This model, which is used by Jambo, VoiceStar, and most Ingenio clients, including AOL and Miva, shows users a custom 800 number for each ad, which is routed through the vendor’s server for tracking when the user calls from any phone.

This kind of pay-per-call is just as applicable offline in mobile, radio, print, outdoor, and direct mail. “Pay-per-call can transcend the Internet; it can be used on billboards, mobile devices, or anywhere else you want to track a phone number,” Sterling said.

Ingenio is deployed in mobile, through AOL Mobile and Go2. Barach expects pay-per-call to be the primary monetization model for mobile search once it finally takes hold.

In the meantime, Ingenio is already finding success in free directory assistance applications such as Jingle Networks’ 1-800-FREE411, UpSnap’s Free 411 service, and in podcasts, through a June deal with Podbridge, Barach said.

Getting pay-per-call into radio is a trickier business, primarily because of the way radio ad time is sold, Barach said. “If pay-for-performance will make more money in the long term, but less in the short term, many radio ad people won’t go with it,” he said. So far, Ingenio has tested running pay-per-call ads on unsold inventory. This is welcomed by radio ad sales teams as a way to monetize remnant buys.