Pay-Per-Call: A Ringing Endorsement

CitySearch, producer of online consumer city guides (and a subsidiary of InfoCommerce Group's latest favorite, InterActive Corporation), has raised eyebrows with its announcement that it will be offering advertisers a pay-per-call option, in addition to its existing pay-per-click programs. Pay-per-call is analogous to pay-per-click, but the mechanism for capturing and measuring ad effectiveness is phone response rather than clickthroughs. Advertisers run a special number in their online advertisements, each call is tracked by the service provider, and the advertiser pays based on the number of calls received.What's going on? What we're seeing is increasingly explicit acknowledgement that -- gasp -- clickthroughs are not the same as sales. The great irony here is that the place where pay-per-click advertising apparently doesn't resonate is among smaller, local advertisers, so-called "unsophisticated advertisers" who view pay-per-click as buying increased traffic, not increased business. CitySearch believes, and we concur, that, when it comes to pay for performance, it's a lot easier to prove the value of, and charge for, forwarded phone calls than anonymous clicks. And while it may seem hard to believe, a large percentage of businesses still don't have Web sites, but pay-per-call can work for these companies, while pay-per-click can't. Pay-per-call combines the best of two worlds - the increased reach of the online media, the traditional measurability of direct response and the siren song of "pay for performance." And it proves the significant benefits of viewing old world and new world marketing channels as complementary rather than competing.While the CitySearch embrace of pay-per-call is significant, real credit for this important development properly goes to FindWhat, which launched the concept back in September. FindWhat is working in partnership with technology provider Ingenio; CitySearch is using technology from CIRXIT. This new technology is already hard at work chasing the huge B2C market, though we would contend the opportunities are just as big in B2B. Unlike the consumer market, B2B buyers are not known for purchasing machine tools, overhead cranes and printing presses through online shopping carts. B2B purchases are typically more complex, with longer sales cycles. At some point the buyer usually picks up the phone to call the seller. That's why showing true return on investment is so difficult for those selling pay-per-click programs to B2B companies. A pay-per-call capability is a much more apt and convincing selling tool for B2B publishers.So keep your eye on pay-per-call. For B2B buying guide publishers, this is one killer app that can actually live up to its promise

To Market, To Market

One of the most adrenaline-charged corners of the Internet during the dot com boom was occupied by electronic marketplaces. At their peak, over 1,000 of them existed, mostly in B2B verticals. By some estimates, fewer than 100 of them survive today, and the most successful of them are B2C marketplaces.

Electronic marketplaces are important to buying guide publishers because not much separates the two. Indeed, marketplaces offer a logical evolutionary path for buying guides because they support infocommerce precepts of business process integration and adding value by increasing user productivity. Most tantalizing of all, marketplaces hold the promise of transactional revenues, which can far exceed advertising and subscription revenues. It’s the right destination, but the road to this promised land has been a rocky one. (think IndustryNet – ahead of its time and VerticalNet – out of its mind).

Why are consumer marketplaces flourishing while B2B marketplaces struggle? There are three primary reasons. First, consumer marketplaces are a totally new concept, and compete only marginally with local yard sales and flea markets. They’re asking users to do something new, not change their established habits. B2B marketplaces, by contrast, are rigid and highly structured, and often require substantial changes in how users conduct their business. Second, it’s easier to achieve liquidity with consumer marketplaces – enough buyers and sellers to produce satisfactory outcomes on both sides. B2B marketplaces, by contrast, often need fantastically high levels of industry participation to achieve liquidity, and most fail before to achieve it. Third, consumer marketplaces are a borderline form of entertainment. They tend to be the electronic equivalent of noisy bazaars, with personality, pictures, and generally low price-low risk transactions. B2B marketplaces are more typically designed for the “rational” business buyer, so content is factual, quantitative and so uniform that computers can make purchasing decisions – and indeed some B2B marketplaces were designed with exactly that objective. So it’s no wonder that humans have been slow to embrace them.

The most important trend in consumer marketplaces is that they now are moving from the spot market, auction model to more conventional storefronts, where specific merchandise is dependably available at any time. In a sense, they are morphing from flea markets, where you never know what’s on sale, to shopping centers, where you go because you know exactly what you’ll find. This is a significant evolution and one that is now being adapted by business-oriented marketplaces (think eBay Business). With the organization of large collections of vendors in one place with common front-end interfaces for product discovery and ordering, we’re seeing the next-generation of buying guides, and they will present a formidable challenge. For buying guide publishers, the time for pre-emptive moves is now.

When Is A Click Not A Click?

By now, you should be familiar with the term "click fraud" which refers to the act of repeatedly clicking on paid search links to either fraudulently make money, or to create an expense for those you don't like (such as a competitor).

We've addressed click fraud in columns past, citing the investigative news stories coming out of India suggesting that there are sizable organizations in place that exist solely for the purpose of committing click fraud. Click fraud is an important development for B2B publishers to be aware of. Most don't employ the pay-per-click business model, and thus their advertisers can't fall victim to click fraud, an advantage that many B2B publishers should be quick to emphasize to prospective advertisers.

But how big is click fraud really? It's getting a lot of attention lately, but how prevalent is it?. Reliable statistics on illegal activities like this don't exist, and the search engines have all been taking steps to implement technological solutions to reduce click fraud. So is click fraud a tempest in a teapot? We were starting to think so, until we saw this stunning quote from George Reyes, Google's CFO, speaking at a major investment conference hosted by CSFB this week:

"I think something has to be done about [click fraud] really, really quickly, because I think, potentially, it threatens our business model."

As one insight into the size of the problem, Jessie Stricchiola, the president of Alchemist Media, a paid search consulting firm, told CNN that she estimates that as much as 20 percent of all clicks on paid search ads are fraudulent, and she contends that not all search engines have been as aggressive as they could be about combating click fraud. Of Google she noted, "Google has been the most stubborn and the least willing to cooperate with advertisers" that complain about click fraud.

Published reports indicate that click fraud was a primary topic of conversation at recent conferences sponsored by Jupiter and Majestic Research as well. There are now open discussions in investment circles about how exposed the major search engines may be with regard to click fraud, and some analysts are even suggesting a close watch on companies such as eBay and Amazon, which are heavy buyers of paid search, and thus have a greater exposure to fraud.

In our view, click fraud is simply one more illustration of what continues to be most problematic about "pay for performance" advertising: it looks great as long as you don't look too closely. Yes, search engines only get paid if they perform, but for most B2B marketers, "performance" means having traffic shipped to their sites. If that's all you want, great. But if you're depending on paid search for qualified leads or sales, maybe it's performing, maybe it's not. Nobody really knows for sure. And even if the search engines are able to wipe out the scourge of click fraud, they remain resistant to looking too closely at the remaining legitimate clicks they generate for advertisers. To the search engines, all clicks are created equal, and they need it to stay that way. Because if it becomes clear that not all clicks are of equal value and quality to the advertiser, guess what? Advertisers will want to pay less for all clicks, or only pay for the best quality clicks. Either scenario is bad news for the search engines, for whom your ignorance is their bliss.

Where Have All The Subscribers Gone?

An article in a recent issue of DM News by Meg Weaver, founder of Wooden Horse Publishing which produces a database covering the magazine industry, concludes that magazine publishers have hit a wall in terms of subscribers, and that the numbers are in significant decline. As she phrases it, this is "... a dirty little secret the magazine industry doesn't want you to know: We have run out of readers in this country."

To document this claim, Weaver cites her analysis of Audit Bureau of Circulation numbers. By looking at cumulative circulations of all audited ABC publications, she notes that the industry grew consistently in terms of circulation until 1990, when things began to plateau at 366 million. The 2003 number? A cumulative circulation of 353 million. Weaver attributes this primarily to uncreative "me too" publishing practices in the magazine industry, which leaves the industry in a position of continuously poaching subscribers from each other rather than creating innovative new magazines that would attract net new subscribers.

But is this the full story? My first concern was reliance on ABC circulation numbers, since ABC is favored mostly by consumer publications. Further, ABC provides circulation numbers only on its membership, and that creates a sample biased towards larger publications that need circulation audits.

My sense is that the story, which probably does begin around 1990, is far more nuanced. What we've seen over the last 15 years is an explosion in the number of increasingly specialized magazine titles, some with circulations in the low thousands. We've also seen increasing amounts of information delivered via the Web, faster, fresher, more accessible and often even more specialized than the most specialized print publications. In short, information is proliferating, and as a result, audiences are fragmenting as they increasingly move to access only the information of most interest to them, shutting out a lot of more general information sources in the process.

We're now in an era of extreme specialization. Subscribers are getting used to mixing, matching and filtering content. And as they read less, and focus most on topics they care most about, guess what? You need to keep up with them editorially, because these empowered readers want depth and substance, and they know immediately when they're not getting it.

This shift has implications for data publishers too, because our businesses are being forced to address the same trends. What was "good enough" in terms of editorial quality isn't good enough any more. The data that our subscribers choose to receive gets scrutinized as never before, by increasingly expert eyes. It's a tough new standard to meet, but there is ample evidence that if you can deliver good quality editorial, there will be an audience willing to pay for it.

Say Cheese: Databases Go Hollywood

Publishers, hold onto your hats and grab your digital cameras: it's looking like the next big battleground in the directory world is going to be visual.

All of a sudden, photos of businesses and buildings are red hot and getting lots of attention. Several months ago, infoUSA announced it had dusted off its mothballed project to photograph every business in America, and would be adding photos to several of its products, including its beefed-up business credit reports. CoStar, producer of a national commercial real estate databases, has a fleet of trucks running around the country snapping shots of every office building. Now, Amazon.com's new search engine, A9, is generating big buzz with a yellow pages directory with photos of businesses. And, rising above them all is GlobeXplorer (a 2004 InfoCommerce Model of Excellence), which offers aerial photos of America and which are being integrated into several business database products.

Why pictures? Let's face it: directory and databases are very useful, but very useful is not always the same as very interesting. Adding photos makes a database more interesting. In some applications, a picture may well be worth a thousand words. In fields such as real estate, it's hard to conceive of a product without photos. Even in a credit report product, a photo of the business might provide valuable added insight.

But do photos add much to a yellow pages product? I took a quick spin through the A9 yellow pages to try to answer that question. When you do hit a photo of a business (and A9 only has coverage in selected areas right now), it's impressive. A9 offers you a series of snapshots around the business, so you can get a view of the whole street. In a great case of unintended product placement, more than a few of these photos seemed to be of UPS trucks parked at the curb and obscuring the storefront, but overall the project achieves one of A9's stated objectives, which is coolness.

The big question of course is "why?" Is the user better off for having access to these photos? A9 suggests photos help users more quickly get to stores by providing a visual cue in addition to the address. That's certainly valid (although the cost/benefit ratio seems a bit high), but there is a bigger issue. In many cases I would be staring at a well-composed photos of a business with no clue what it did beyond the general yellow pages category in which it was classified. Therein lies the rub: A9 is layering these neat and glitzy photos on top of a very weak dataset. Photos may distract users from the lack of information about the listed companies, but they don’t substitute for basic data.

A search for restaurants in downtown Philadelphia brought me lots of listings, all sporting name, address, phone and photos. Yet the photos, while novel and interesting, still don't tell me about cuisine, menu, hours, credit cards accepted, or any of the more mundane facts that are frankly more useful. When it comes to directories, photos without a strong underlying data record will never offer more than part of the picture.