Pay-per-call hopes to lessen online marketing fraud

Mobile marketers are looking to avoid the “pay-per-click” problems that continue to plague online advertising. And many of them are hoping simple phone calls provide the solution.
Google Inc., Yahoo Inc. and other ad-supported online search engines charge advertisers a set amount each time a consumer clicks on a marketing link. But the Internet behemoths and their smaller competitors have long struggled with click fraud, which occurs when an advertising link is deliberately clicked on by users who have no intention to do business with the advertiser.
Competing firms sometimes click on a company’s online ad to drive up their rival’s advertising costs, while the owner of a Web page could repeatedly click on ads in an effort to boost commissions.
Advertisers have filed suit against several Internet companies, claiming Web search services have cost advertisers countless millions by not protecting their users from click fraud. Google last year settled one lawsuit for as much as $90 million, and Yahoo has responded to a class-action suit by agreeing to pay $5 million in legal fees and review advertiser click-fraud complaints since 2004.
As mobile marketing begins to get legs, though, firms are looking to deploy pay-per-call models wherein advertisers pay only when a consumer clicks a link that initiates a phone call. Hang-ups and other short-lived connections don’t incur a charge, minimizing the risk of “call fraud,” and advertisers can measure response rates to their campaigns simply by tracking incoming telephone calls.
“You’re blind to a click on a Web site, but with calls that come into your call center, your office, you are party to the other side of the transaction,” according to Marc Barach, chief marketing officer for Ingenio Inc., a San Francisco-based developer of pay-per-call technology. “It’s very easy to hear if something is amiss.”
The 7-year-old firm boasts customers including AOL, InfoSpace Inc. and Microsoft Corp., and this week will unveil a partnership with mobile search firm JumpTap Inc. Ingenio’s pay-per-call ads will be listed among search results from JumpTap, which provides a white-label offering for Alltel Corp. and several other carriers.
Not only is the model less susceptible to fraud than pay-per-click, it appears to be more valuable to advertisers. Online clickable ads can cost anywhere from a few cents to $1 or more per click, depending on the product or service being offered, but pay-per-call costs-which are set by an open auction-generally start at $2 for impulse buys such as taxi services, and average $8 to $10 a call. Calls for more lucrative offerings such as financial services can cost $50 or more.
And it’s those high-dollar searches that are beginning to gain traction among wireless users, Barach said.
“The conversion rates are higher on calls; the consumer is closer to the sale,” he explained. “When we look at the entire base, we’re seeing three to eight times better conversions on customer calls vs. a click. . And we’re starting to see a shift in consumer behavior that indicates people are using these devices to do more complex searches; the type of searches they’d do in a desktop environment.”
Also, while a business must have an online presence to take advantage of clickable links, the pay-per-call model requires only a telephone to receive an inquiry from a potential customer. The market research firm Kelsey Group estimates that pay-per-call advertising will reach 15 percent of all local search advertising by 2010, up from about 2 percent today, and projects the market will more than double each year for the next five years.
“Consumers really like this sort of thing on a mobile phone,” Barach said hopefully. “What we’re seeing here is that the pay-per-call model is in fact going to be the primary business model or way to create ad revenue in a mobile environment.”