• by Shankar Gupta , June 22, 2005

The nascent pay-per-call advertising market could swell to $4 billion by 2009 in the United States alone, according to a report by the Kelsey Group released to clients on Tuesday.

The report, entitled "Calls, Clicks & SMEs," extrapolates from response rate data obtained from Internet Yellow Pages, and then puts forward three scenarios based on the penetration of pay-per-call distribution and sales. The most conservative scenario pegs revenue from pay-per-call in 2009 ads at $1.4 billion, assuming that 5 percent of calls from local search and Internet Yellow Pages are monetized via pay-per-call, and the most optimistic prediction puts it at $4 billion, assuming a 15 percent monetization.

Greg Sterling, the author of the study and an analyst with Kelsey, said the current revenues for pay-per-call ads are negligible. Currently, AOL is the only major portal company to distribute pay-per-call ads.

The study states that on the whole, calls are more effective than clicks at driving consumers to small and medium enterprises. The report further predicts that those businesses, although they haven't yet adopted pay-per-call advertising, will "be compelled to do so by increasing numbers of consumers looking online for local information."

"We think that the call product is a product that has a lot of potential," Sterling said. "Most of the local businesses are service businesses that are used to dealing with the phone as a vehicle for receiving and closing leads, and consumers are used to using the phone as a way of contacting local businesses."

Sterling added that one of the factors that could drive adoption of pay-per-call models is the problem of click fraud--clicks generated by programs or individuals that do not generate real leads, but nevertheless cost an advertiser money. "If click fraud becomes perceived to be a widespread problem, companies might opt for calls instead of a click product," he said. The search engines are addressing it, but they're not doing it in a public way. If, over time, [companies] don't perceive value there--if they don't perceive that those clicks are real leads, but they want alternative online marketing--this could be that alternative."

The study also noted that pay-per-call ads need not be stand-alone products, and that search engines and other distribution channels could bundle them with clicks sold--offering pay-per-click keywords or ads along with a monitored pay-per-call phone number.