Rise of New Payment Models for Search Advertising

Olga Kharif

Search sites' pay-per-click search advertising model has just been called out. For years, advertisers have had to pony up a fee -- sometimes more than $20 - to sites like Google every time consumers clicked on these advertisers' search ads. Needless to say, just because consumers clicked on the ads didn't guarantee that they would actually buy those business's wares or services.

Now, however, a slew of technology companies, including Ingenio and Snap.com, are starting to offer alternatives to pay-per-click that they claim correlate more closely with the actual sales of the advertisers' products and services. And I think they are on to something.

Take Ingenio, for instance, which has come up with the ingenious idea of pay-per-call, which will be implemented by America Online this week. Here's how this works: Consumers click on a business's ad. That takes them to a Web page listing additional information about that business, including its address, phone number, driving directions. Ingenio only gets paid when the customers call that business's phone number, which Ingenio assigns to that business in the first place (It only charges advertisers for the first time a consumer dials that number; all subsequent calls from the same consumer are put through but free).

What?s cool about this approach is that Ingenio's fees, shared with referring search engines and established through bidding, range from $2 to $20 a call - which is comparable to pay-per-click rates. Only, for advertisers, the chance of a transaction going through is greater: After all, if consumers take the time to call, they must be really interested.

The idea could drastically expand the search ads market. Today, more than 70% of small businesses don't even have a Web site. Ingenio will allow them to place search advertising anyway. I've read some positive reviews of the service from Beta-testers.

But Ingenio's is just one of a million new search payment ideas floating out there in cyberspace. A search engine called Snap.com allows advertisers to choose their own criteria for paying for search ads. Businesses can pay a fee for every subscription or a product bought through a search ad, for example.

I love seeing all these options, and I bet that advertisers will love them, too.

Perhaps, eventually, pay-per-click will become the cheapest, most basic - and maybe not even the most popular -- type of search advertising. And other types of pay-per-performance business models will garner higher prices and a greater following. Do you agree?

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