Pay-Per-What? Why the Phone Call Will be King in the Mobile World

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Mobile: Ready, Set, Go

The mobile ad opportunity has everyone standing up and paying attention. According to some projections, worldwide revenue from the consumer consumption of mobile content will be worth approximately $92 billion by 2009 (Informa Telecoms & Media Sept 2006). Data services, in particular, are also becoming more popular. This isn’t surprising given mobile devices are becoming the consumer access point for local business information — for example, the majority of people calling 411 for business information these days are doing so from wireless phones.

As such, we marketers are hungrily circling. In the US, mobile advertising spending is projected to grow from $1.4 billion in 2006 to $2.9 billion in 2011 (Jup Research, Oct 2006).

Obviously consumer data services are headed toward ad-supported models across all kinds of platforms. Consumers are more tolerant of ads because the delivery has become less intrusive, and the ads themselves are being viewed as meaningful content — Google and Craigslist have both capitalized on this fact. The very ad-supported model that was such a gold-mine for search is now extending to mobile search.

But how advertisers will pay still seems up for grab. Will they purchase banners via fixed CPM models? Or will the performance-based ad approach rule, with advertisers buying clicks to their WAP-enabled websites? Both cases are likely to occur, yet neither seem an ideal fit for the consumer, when considering the screen size limitations of mobile devices. Nor do these approaches necessarily deliver every advertiser a qualified lead they can realistically convert to a sale.

Pay-Per-Call, which has been gathering steam as an alternative to pay-per-click advertising since its inception in 2004, has taken on new meaning in light of mobile. Pay Per Call has traditionally referred to the performance-based online advertising model that allows businesses to advertise on websites and search engines, but pay for resulting phone calls instead of clicks to a website. However, many see the model emerging as the primary monetization engine behind mobile advertising.

Pay-Per-Call Sweet Spot?

Logically, Pay-Per-Call is a very plausible pay-for-performance approach to mobile advertising. It makes sense for consumers, who already have the power to make a phone call in the palm of their hands. It makes sense for advertisers, who don’t need to mess with WAP-enabled web sites or optimizing a web presence for a mobile screen. Last, and definitely not least, it makes sense for portals and mobile publishers, because calls deliver more revenue (an average of $8-$10 per call on Ingenio’s system – which trumps clicks by an order of magnitude). These players stand to get a significant cut of the Pay Per Call pie.

This last point is especially interesting when considering the revenue expectations for mobile advertising. In fact, Google’s Eric Schmidt recently claimed that mobile phones will eventually be free, subsidized by the growth in mobile ads. Given the dollar value of a phone lead, coupled with the intuitive nature of a phone call in a mobile environment, it stands to reason that the Pay Per Call model will be a major component to the mobile advertising sector’s projected financial success. This is underscored by reports that both Yahoo! and Google are testing Pay Per Call ads in their mobile search implementations.

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