1-800 Pay-Per-Call: Marchex Buys VoiceStar, $4 billion Local Advertising Bonanza?
“Marchex adds call-based advertising services to local advertising platform with VoiceStar acquisition,” so announces Marchex.
Marchex touts the “significant growth opportunities of the pay-per-phone-call market” in justifying its ”$28 million investment to acquire VoiceStar:
In addition to the growth opportunity associated with the pay-per-phone-call market which the Kelsey Group estimates will reach up to $4 billion by 2009, Marchex believes that providing advertisers with call-based advertising options, in addition to search-based marketing tools, is a prerequisite to success in the local advertising channel. According to Piper Jaffray, only 42% of the estimated 20 million small- to medium-sized businesses (SMBs) in the U.S. have Web sites and many others are still are at the early stages of online marketing. As a result, call-based advertising will continue to be a priority for local advertisers, further evidenced by a recent Kelsey Group survey reporting that 71% of local advertisers would rather pay for phone calls versus clicks.
The actual VoiceStar numbers that Marchex reports, do not indicate such a pay-per-phone-call bonanza is currently underway, however:
While Marchex will only recognize a partial year contribution from VoiceStar, it believes that VoiceStar will generate revenue of approximately $1.5 million for the full year 2007, with an operating income loss. Revenue contribution to Marchex from VoiceStar for the remainder of 2007 is anticipated to be $0.5 million. Additionally, based on current VoiceStar growth rates, Marchex anticipates that VoiceStar’s 2008 contribution will more than double its total anticipated 2007 revenue, excluding cross-selling opportunities with Marchex.
Eight million of the $28 million VoiceStar deal is earmarked for Marchex investment in VoiceStar operations to help spur realization of the market opportunity potential.
Is pay-per-call really a slam dunk, though?
“Phone calls have been, and will continue to be, a predominant way in which consumers connect with small businesses,” says John Keister, Marchex President and COO. PLUS a phone call is a more qualified/valuable lead than a Website click, is the conventional local advertising wisdom.
HOWEVER, phone calls are more expensive for the adveriser than clicks AND advertisers generally give up a lot in getting the tracked call leads: THEIR BUSINESS PHONE NUMBERS!
YES, the big, bad ”secret” dark side of the pay-per-call opportunity is that local advertisers often loose exposure of their REAL phone numbers by accepting call-tracking with random vendor supplied 800 numbers, in going the pay-per-call route.
Citysearch launched a Pay For Performance-Calls product two and a half years ago, indicating (vendor Cirxit image):
Merchants are charged a fee per call and when an adverising cap is reached the toll free number (which appears throughtout the site) is removed and replaced with the local, non-metered number…Citysearch provides a toll free number wherever the local merchant’s contact information appears: PFP ads, search results, merchant information page, and/or Best Of Citysearch listing.
PROBLEMS?
Customers jot down the toll free number to call another time, but end up unable to reach the merchant because the “ad cap” has been reached?
Customers print out the merchant info page for an out of town trip, but end up unable to reach the merchant because the “ad cap” has been reached?
Customer wants to call the merchant a year later but doesn’t have the merchants real phone number…
Even if the pay-per-call vendors provide work arounds for vendor supplied phone number latency “issues,” a fundamental loss of business branding is inherent in the metered pay-per-call phone number overlay tracking solution: Customers do NOT see the advertisers real number in the advertisements.