For Innovative Online Sales, Advertisers Take the Call

The money-making technique that resurrected the Internet advertising market is spreading to the telephone.

Web giants like Google Inc. and Yahoo Inc. have made billions of dollars selling targeted ads that sponsors pay for only when a potential customer clicks on them. In a twist on the pay-per-click business model -- call it pay-per-call -- businesses place ads with a Web publisher and don’t pay until their phones ring.

Citysearch, which publishes local business directories, event listings and reviews, today will become the latest online destination to introduce such a service. Analysts expect the big search engines to follow as they fight with telephone directories for a piece of the multibillion-dollar market for location-specific advertising.

Pay-per-call promises to solve a nagging issue for millions of restaurants, plumbers and other small businesses that don’t do transactions online and have a hard time calculating whether their online listings drive sales. (E-commerce companies can easily tell whether an online ad led to a sale by tracking customers from the time they arrive from Google, Yahoo or other websites until the time they complete the purchase.)

“So many businesses want to advertise on the Internet, but they’re just not click-oriented,” said Marc Barach, chief marketing officer for Ingenio Inc., a San Francisco company that pioneered the method. “A live being on the phone in real time is worth much more than a click to your server in the middle of the night.”

In addition to tempting more small businesses to buy Internet ads, analysts said, pay-per-call services could generate more cash from big advertisers. Some marketers are willing to pay up to 15 times as much for phone call referrals than for clicks to their website, according to Ingenio, whose investors include Microsoft Corp. and EBay Inc.

Here’s how it works: A nail salon strikes a deal with Los Angeles-based Citysearch to display its listing more prominently. What the business owner wants is for people to stop surfing the Web and call to set up a manicure appointment.

“You tend to get more clicks than phone calls,” said Citysearch Chief Executive Briggs Ferguson. “But when you make a phone call, you have a much higher purchase intent.”

Citysearch’s pay-per-call engine, developed by a Los Altos, Calif.-based start-up called Cirxit, puts a unique 800 number on each listing. That number routes calls to the nail salon, but it also lets Cirxit and Citysearch track how many calls their service generates for the business each month.

The breakthrough of sponsored search was that it let advertisers easily calculate their return on investment for each advertising campaign and adjust the amount they were willing to pay. The ability to do the same with phone calls might encourage small businesses to spend more on online advertising, said Greg Sterling, an analyst with Kelsey Group, a Princeton, N.J.-based research firm that studies local media and advertising.

“It’s a form of Internet marketing that translates into a type of lead that they understand,” he said. “It gives them a higher degree of confidence in what they’re buying.”