There is no question that paid search advertising has been one of the most revolutionary advertising models we've seen to date. Online ad spending in the U.S. surged to a record $12.5 billion in 2005 and search advertising -- also coined "pay-per-click" advertising -- is by far the fastest growing segment, accounting for 40 percent of the total online ad spending in the U.S, and expected to grow from $4.2 billion in 2005 to $7.5 billion in 2010.
As the pay-per-click product enters its adolescent phase, new paid search models which extend the principal of performance-based advertising have emerged. Pay Per Call is one such model that has captured attention in the marketplace among both advertisers and publishers. Pay Per Call allows advertisers to purchase calls to their business (as opposed to clicks to their website) from targeted, online ad listings in a performance-based model. There's hardly a search engine, portal or directory that hasn't given it some consideration, and many are in various stages of testing or rollout. Why? New monetization models are a means to not only attract new advertisers, but to broaden existing advertiser relationships.
The pay-per-click product will no doubt continue to attract advertisers and enjoy success for years to come. That said, even today, only a few U.S. businesses advertise on the web -- the majority have yet to venture online. Consumers, on the other hand, show no such reticence; we are conducting more commercial searches online every day, and it is now estimated that 25 percent of all web search is local and commercial in nature. The result is a supply and demand disparity; consumers are increasingly using the web to access business information, but advertisers are lagging behind because the traditional pay-per-click model doesn't necessarily fit the needs of their business.
In addition, our environments are becoming more complex by the minute. The term "search" no longer just refers to "web search" on a desktop, as new mediums and formats like mobile search and free 411 services are taking shape. As new technologies continue to surface and consumer behavior shifts, a dizzying array of ad distribution channels have appeared, and dreaming up ways to monetize each new medium is forcing our industry to think outside the box. Simply put, our worlds have become more sophisticated than the pay-per-click model can support.
The bottom line is, not every online advertiser wants to spend cash on clicks, nor does a click-driven monetization model make a lot of sense when it comes to ad distribution outside of traditional web search (have you tried clicking to a pizza joint's web page via your mobile phone recently?). The good news is that advertisers are looking beyond the confines of pay-per-click to see what else is out there. Are they planning on abandoning their click campaigns? Absolutely not. But as the future unfolds, alternative models like Pay Per Call will take on new meaning for some who never considered it an option before.
Pay Per Call Today
Today, Pay Per Call advertising is gaining a lot of traction among local and national businesses in categories like financial services and debt consolidation, travel, hospitality, cable and satellite TV and car rentals. However, unexpected business categories continue to discover Pay Per Call, for different reasons. Radiator.com, the leading online provider of radiator sales and distribution, was driven to explore Pay Per Call because of click fraud concerns. John Thys, director of internet marketing, suspects click fraud may have accounted for as much as 35 percent of his company's $20,000 Google ad bill. Thys views Pay Per Call as inherently less susceptible to fraud scams and gets him closer to the "point of sale." Cost-per-action lead models, like Pay Per Call or offerings from providers like Snap.com, force accountability by ensuring advertisers only pay for something tangible, like a phone call or a completed online application.
Many national brands, such as 1-800-DENTIST, are discovering that Pay Per Call can drive traffic to call centers directly from the internet. It enables direct response in the form of a phone call from an online ad, with visibility into how that online spend culminated in an offline conversion. For the first time, national marketers can understand and optimize the relationship between their online campaigns and offline impact.
While it varies based on the type of business and the amount of sale, across the board, advertiser feedback is that calls do convert better than clicks to a website. For example, a provider of cellular phones and plans finds that using Pay Per Call advertising generates three times better leads than clicks and a national floral service converts approximately 1 in 3 Ingenio calls compared to 1 in 25 clicks.
It's important to note these are industries where phone calls are a preferred method of interaction because, often times, the purchase is complex, or there is a question and answer period needed before the customer is ready to buy. You can imagine online retailers -- like Amazon for example -- being less interested in driving phone calls, while other retailers who run both ecommerce websites and support call centers seek to drive traffic to both. American Incorporators Ltd (AIL), one of the nation's top providers of incorporation services, has been running a Pay Per Call campaign for more than a year, but still estimates it spends about $10,000 a month on its pay-per-click campaign, which the marketing manager, David Clarke, deems moderately successful. He has no intention of scaling back on his pay-per-click programs, and instead is happy to supplement those leads with calls, especially because there are plenty of potential customers who prefer to pick up the phone to call his business.
As we embark on the next phase of search engine marketing, "search" is not necessarily going to be synonymous with "web search." The attributes of the paid search approach -- the self-qualified customer lead, the pay-for-performance model -- have already extended to other formats. Mobile search (via text messaging) and free directory assistance are all tapping into ad-supported models, and these are both examples of sweet spots when it comes to Pay Per Call monetization. For advertisers looking at eventually leveraging these new channels, models like Pay Per Call will become increasingly more relevant-- and lucrative.