Transforming Clicks Into Rings

Marketeers have created the Google empire by paying the company every time consumers click on an ad. Imagine how much advertisers would pay if Google and other search engines could get customers to actually call instead.

Herding customers of local businesses to the telephone is the latest effort of search engines to attract small and medium-size advertisers, which represent a huge, and as yet untapped, market. According to Greg Sterling, an analyst with the Kelsey Group, only about 350,000 small businesses worldwide are using paid search advertising.

In recent weeks, technology companies have begun unveiling new services to further the effort. The idea behind the services is, simply enough, to direct customers from search engines to off-line businesses, where most commerce is actually conducted. The problem is not only that small businesses typically lack Web sites they can direct Internet searchers to, but they often lack the expertise or the will to prospect for customers online.

Sites could encourage calls by highlighting phone numbers with the ads that run atop or alongside search results, but since Google, Yahoo, FindWhat and others have no way to track a customer’s call to the advertiser, they cannot prove they deserve a fee for helping make the connection.

As an alternative, search engines could adopt the Yellow Pages approach, where advertisers pay a monthly fee to display a phone number. But one reason these sites have been so popular with Internet advertisers is that they charge fees only when a customer engages with the advertiser. (In online parlance, this is the “pay for performance,” or “pay per click” model.)

New offerings from companies like Ingenio and eStara, though, offer the search sites a way to tabulate calls generated by searches. Ingenio was the first to announce an agreement with a search marketing company of significance, when it signed a deal with FindWhat in April.

The Ingenio service, which is to begin this summer, relies on old technology: toll-free numbers. When a user types in a search for, say, plumbers in Tucson, FindWhat’s advertisers will display a dedicated toll-free phone number that Ingenio has secured on the advertiser’s behalf. (Advertisers will eschew Web addresses in their ads.)

When the customer calls the number, Ingenio registers the event and charges the advertiser whatever fee the advertiser had bid for the right to appear near the top of the search listings. Ingenio and FindWhat then share that fee according to a revenue split that neither company would disclose.

The buck does not stop there. FindWhat then shares its fee with the search engine on whose site the ads actually appear (as with Yahoo’s Overture unit, FindWhat exists solely to feed advertisements to search sites). Advertisers pay Overture a fee so their ads appear alongside search results on Yahoo and MSN, among others. Likewise, companies pay FindWhat so their ads can appear near search results on Dogpile, Cnet and other smaller search sites.

Analysts said that Ingenio’s approach was good, but its success relied on elements that were beyond its control.

“I think it’s going to fly,” Mr. Sterling, the analyst, said. “How far and how quickly it’ll fly are the questions.”

Small businesses have long poured advertising dollars into Yellow Pages companies and other local media, but those publishers and broadcasters have local sales agents to pitch the ads and manage accounts. Google, Overture and FindWhat rely on self-service, where advertisers click their way through forms to open accounts, and then monitor their ads’ performance.

Because many small businesses either have no time or are not willing to do this on their own, Yellow Pages publishers could be important to seeding the market for pay-per-call online advertising. FindWhat’s chief executive, Craig Pisaris-Henderson, said he was trying to sell his pay-per-call search advertising services to Verizon and other Yellow Pages publishers.

Already, FindWhat provides paid search listings to SuperPages.com, Verizon’s online Yellow Pages directory.

“They have the assets to really take this to the next level,” Mr. Pisaris-Henderson said.

But Verizon is not ready to commit, said Eric Chandler, vice president for e-commerce marketing at Verizon Information Services. Mr. Chandler said local advertisers might not want a toll-free number displayed, because it might confuse customers – particularly if the number changed after a period of months, as could happen with the Ingenio system. “Still, we like the opportunity here,” he said of the pay-per-call approach.

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http://www.nytimes.com/2004/06/07/technology/07ecom.html