Update: Google tests pay per call ads

Phone icon has begun to appear with some ads

Google Inc. has begun testing pay-per-phone-call ads, an emerging online ad model that is a twist on the popular pay-per-click ads.

While pay-per-click ads link users with advertisers' Web sites, pay-per-phone call ads link users and advertisers by phone. The Kelsey Group recently forecasted that in 2009 spending on this type of online ad could reach $1.4 billion, so it's not surprising to see Google testing this model.

Just as pay-per-click advertisers only pay when a user clicks over to their Web site, in pay-per-phone call advertisers only pay when the ad leads a user to contact them by phone.

As in pay-per-click, the cost of pay-per-call ads typically is determined via an auction process. The larger an advertiser's bid for a search keyword or search category, the higher its ad appears on the list of related ads that a search engine serves up after a user enters a search query.

In Google's case, a phone icon has begun to appear with some ads and after users click on it, they can enter their phone number. Google then generates a call between the user and the advertiser, according to an FAQ (frequently asked questions) page about the pilot program on Google's Web site (http://www.google.com/help/faq_clicktocall.html).

The call is free to the Google users.

"Google is always considering new ways to provide value to its advertisers and we frequently run tests of potential new features and products. We are currently conducting a limited test of a pay-per-call model, but we don't have any additional information to share at this time," a Google spokesman wrote in an e-mail message to IDG News Service.

For users concerned about giving out their phone numbers, Google promises not to share the number with anyone, including the advertisers. "When you're connected with the advertiser, your number is blocked so the advertiser can't see it. In addition, we'll delete the number from our servers after a short period of time," the FAQ reads.

Ingenio Inc. is considered the leader in this emerging market -- they sell pay-per-phone-call ads to advertisers and provide the back-end technology for the ads. Its pay-per-phone call ads are distributed via a network of providers that includes America Online Inc. AOL shows Ingenio ads in the sponsored search section of its search engine results and its AOL Yellow Pages online directory.

Yahoo Inc. has also been testing pay-per-phone-call ads for several months on a small portion of its search traffic, a Yahoo spokeswoman said Monday. There is no ending date for the test, she said. "If it's something our advertisers want, we'll have more to say at a later date," she said.

Another big player in this market is Verizon Communications Inc., which began offering pay-per-phone-call ads in October.

An acknowledgement from search giants Google and Yahoo that they are dipping their toes into pay-per-call is significant news for this new online ad model, said Greg Sterling, a Kelsey Group analyst. It is also good news for companies that prefer to generate calls, instead of Web site clicks, from their online ads, Sterling said.

For Google, if it were to fully embrace pay-per-call, the benefits would include getting a higher revenue rate than from pay-per-click, because pay-per-call ads in general tend to be more expensive, he said. They typically start at around $2 per call, with an average of $7, and can cost more than $30, Sterling said.

The reason why advertisers are generally willing to pay more for a call than for a click is that a prospective client who calls is presumably closer to making a buying decision than one who visits a Web site, he said.

Also, a company that gets a phone lead can tailor its message and sales pitch on a one-on-one basis and engage the potential client in a conversation, a much deeper level of engagement than is generally possible with a Web site visitor, he said.

Google would also attract a broader base of advertisers, namely those that haven't found pay-per-click particularly effective, he said.

Pay-per-call is an ideal model in situations in which products for sale are costly, or where closing the sale involves a complex process, he said. Pay-per-call is also ideal for providers of professional services, such as doctors, lawyers, realtors, accountants and financial planners, Sterling said.

Copyright © 2005 IDG Communications, Inc.