Your Listing, and a Word From Our Sponsor

April 20, 2006

A raft of start-up companies has begun offering free directory assistance over the phone. But callers won’t get their numbers right away: They have to listen to an advertisement before hearing their desired listing.

The new companies, which operate under national brands such as 1-800-FREE411 and 1-800-411-METRO, are inspired by the business model of a technology giant: Google Inc. And just like Google, which sells Web advertisements tailored to specific online search results, the phone companies’ audio ads are narrowly targeted.

If you call for the number of a neighborhood pizza joint, you might hear a 10-second pitch for, say, Domino’s Pizza Inc. A request for a specific flower shop might trigger an audio ad for Inc. After listening to the paid pitch, callers have the option of choosing to be connected to the advertiser. Or they can hit a different button to get their original, requested number. If you request a residential listing, you probably won’t hear any ad, because there’s no business to match your request to. Indeed, right now, even some callers requesting business listings may not hear any targeted advertisements, since many of the free 411 services are only now signing up advertisers.

“It’s the same exact model [as Google], except it’s applied to the telephone,” says George Garrick, the president and chief executive of Jingle Networks Inc., which runs the new 1-800-FREE411 service. Jingle, which launched its service in September, says it processed seven million calls last month from more than three million different customers.

Jingle says its advertisers have included Domino’s; ServiceMagic Inc.;; Progressive Insurance; and Enterprise Rent-A-Car Co. Mr. Garrick says callers aren’t turned off by the ads, most of which are 10 to 12 seconds long. “People have just come to accept that advertising is a way of getting free stuff,” Mr. Garrick says.

The growth of such free services could represent another big change in the telecom industry, which is already being reshaped by consolidation and new Internet technologies. Free directory assistance is increasingly attractive because regular 411 calls are becoming more expensive. Traditional phone companies have raised their rates over the past several years. In addition, people are making more calls from mobile phones, whose carriers charge an average of $1.50 per 411 call, according to Pierz Group, a telecommunications consulting firm in Clarkston, Mich. Directory assistance from fixed-line phones costs an average of $1.15 per call. The U.S. directory-assistance market had revenue of $6.5 billion last year.

Calls to the new free 411 services currently make up only about 1% of all directory-assistance inquiries, according to Kathleen Pierz, managing partner of Pierz Group. She expects that figure to grow. “The biggest percentage of the [free 411] calls are new calls,” she says. “It’s incremental call volume from people who are more price-sensitive.”

Calls to 411 are among the most profitable services at traditional phone companies. But according to Ms. Pierz, big phone companies, like AT&T Inc., aren’t necessarily losing a lot of business to the new services, at least not yet. The big phone companies, however, have been gradually losing some 411 business to the Internet, as people turn to online yellow-pa