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interactive local media

Interactive Local Media White Paper

Calls, Clicks & SMEs:
Greg Sterling,Neal Polachek , 6/17/2005

Executive Summary

There are perhaps more than 20 million small and medium-sized enterprises (SMEs) in the U.S., depending on how one defines the market. There are also many millions of SMEs around the globe. Though a relatively small percentage currently uses online marketing, The Kelsey Group (TKG) believes that small businesses will eventually be compelled to do so because consumers are increasingly turning to the Internet to find local information.

Based on the experience of using newspapers and Yellow Pages, consumers are accustomed to making a phone call to contact local businesses, which are similarly used to closing leads over the phone. Thus a performance-based online advertising medium that delivers calls (vs. clicks) is a natural for the local market.

Since (now MIVA) and Ingenio first announced the rollout of Pay per Call last September, there has been a rising tide of expectations and anticipation surrounding the new medium. That further intensified with the recent introduction of Pay per Call distribution on AOL. There is now a host of companies that have emerged (or altered their business models) in an effort to enter the market. These include CallSource, CIRXIT, eStara, MediaTracks, ThinkingVoice, VoiceStar and ZiffLeads.

Despite all the enthusiasm, there is limited concrete information on the relative performance of calls vs. clicks. Preliminary indications and anecdotal information, however, are promising.

One of the acknowledged challenges surrounding SME adoption of pay-per-click marketing is the learning curve inherent in keyword selection and bid pricing. Those challenges have spawned a similar debate, surrounding pricing, within the pay-per-phone-call (PPCall) arena. Some argue that flat pricing is critical to adoption, while Ingenio and others argue that auction pricing is more transparent and will deliver the greatest advertiser and publisher value in the long term.

Given the embryonic nature of the market, forecasting potential PPCall revenues is a challenging task. However, TKG has been very meticulous and attempted to build a credible model and five-year outlook. Our assumptions and methodology are discussed in detail in this White Paper.

In addition to its inherent SME appeal, PPCall is also a cost-per-lead model. It thus addresses click fraud, which is perceived to be a growing problem by online marketers. Beyond this, calls potentially also help close the loop between online shopping and offline buying the dominant transaction model into the foreseeable future.

PPCall is not a panacea for local, and calls are not relevant or appropriate for all small businesses. However, The Kelsey Group expects that calls either in the form of call tracking or PPCall will be ubiquitous in the SME market. Its thus only a matter of time before Google, Yahoo! and MSN, like MIVA and AOL, offer some version of these products to consumers and advertisers.

Copyright � 2005 The Kelsey Group. All Rights Reserved.
This published material is for internal client use only. It may not be duplicated or distributed in any manner not permitted by contract. Any unauthorized distribution could result in termination of the client relationship, fines and other civil or criminal penalties under Federal law. The Kelsey Group disclaims all warranties regarding the accuracy of the information herein and similarly disclaims any liability for direct, indirect or consequential damages that may result from the use or interpretation of this information.

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The Kelsey Group, Inc., 600 Executive Drive, Princeton, NJ 08540-1528
Tel: (609) 921-7200 Fax: (609) 921-2112 E-Mail: [email protected]
Copyright© 2006 The Kelsey Group. All Rights Reserved.