July 30, 2012
LOCAL AD VALUE COMPARISON
An Empirical Evaluation of Cost-Per-Call Performance: YPSM ads1 vs. Google™ AdWords™
By Jonathan Hurd, Allen McGonagill and Daniel Mazor
In a controlled study, we used call tracking to compare the cost-per-call performance of parallel ad campaigns on the YPSM Local Ad Network and Google™ AdWords™ for more than 50 local advertisers across a broad range of business categories and US geographies.
STUDY OVERVIEW
Executive Summary
Local businesses need to spend their precious advertising dollars in the most effective way possible. For most, this means getting the phone to ring − business owners know that consumers pick up the phone when they are serious about making a purchase. Businesses can’t afford to waste their advertising dollars in media that don’t measurably generate sales.
For years, researchers have suspected that online directories (e.g., online yellow pages) can be a better value for local advertisers than general search services (e.g., Google). Companies’ internal measurements of the cost to generate a phone call (“cost-per-call”) often indicated that online directories have lower cost-per-call than general search. However, evidence has been either anecdotal, proprietary, or based on self-reported information.
To evaluate actual cost-per-call, YP commissioned Altman Vilandrie & Company to conduct a market experiment comparing ads on the YPSM Local Ad Network to Google’s AdWords™.
Our study revealed that the average AdWords™-sourced call is nearly twice as expensive as one from YPSM ads. Of the 56 companies receiving calls from both YPSM ad listings and AdWords™ ads*, 77% realized better value (i.e., lower cost-per-call) from YPSM ads. YPSM ads also outperformed AdWords™ in 85% of the 20 business categories we tested (e.g., dentists, florists, etc.).
Average Cost-per-Call Better Value For Participant Better Value In Business Category
1Ads run on the YPSM Local Ad Network may appear on the YP.comSM site and on hundreds of additional publisher sites that also carry YPSM ad
listings. YP.comSM site was previously YELLOWPAGES.COM; YP was previously AT&T Interactive and AT&T Ad Solutions.
*Six companies received calls from only one source: four did not receive a call through YPSM ads and two did not receive a call through AdWords™
**Excludes two outlier participants who experienced > $400 cost-per-call on AdWords™
YPSM ads AdWordsTM YPSM ads AdWordsTM YPSM ads AdWordsTM
Contents
1
Executive Summary
6
About this Study
2
Study Design
4
Detailed Findings
5
Study Considerations
Page 2 $0 $50 $100 $150 $200 $250 $300
In addition to being less expensive, YPSM ads exhibited less cost-per-call variability than AdWords™. Excluding outliers*, advertisers’ cost-per-call with YPSM ads ranged from $8 − $162, compared to a much wider range of $17 − $257 for AdWords™. This head-to-head market experiment is the first independent study of its kind, and demonstrates that for most local advertisers, YPSM ads generate better
value on cost-per-call than AdWords™.
Study Design
Altman Vilandrie & Company (“AV&Co”) designed and conducted this study independently to ensure that our findings would be objective and accurate. We recruited 62 businesses to participate in the experiment from 20 different categories (e.g., dentists, florists), spanning 18 U.S. cities in nine states. As incentive to participate in the study, we offered each business a monthly advertising budget worth up to $1,000 to be spent on parallel campaigns on Google’s AdWords™ and on YPSM ads.1 Advertisers who had engaged YP to manage their Google™ AdWords™ campaigns were ineligible.
AV&Co made sure that an AdWords™ campaign was set up for each advertiser participating in the study. Of the study’s 62 participants, 48 already had AdWords™ accounts. This group of advertisers set up call tracking on AdWords™ campaigns with the same keywords, geographies, and bid strategies as their original campaigns. AV&Co set up accounts for the 14 participants who were new AdWords™ advertisers, offering them technical assistance but no creative input. Of the participants, 16 already had independent marketing firms managing their AdWords™ campaigns. These participants continued to use their marketing firms during the study, and we factored associated expenses into their cost-per-call. Each participant’s AdWords™ listing was assigned a new call tracking number, distinct from the business’s original phone number.
For each advertiser, AV&Co also worked with YP to set up a Platinum Listing1 campaign that ran in parallel with the AdWords™ campaign. The YPSM ads listing included a separate call tracking phone
number, distinct from the business’s main number and from the AdWords™ number. When necessary, we added supplemental points in order to boost overall ad ranking, ensuring that the listings remained in the mid-page position of the first page for the primary category and geography. The accounts were set up, but no creative assistance was provided beyond what YP typically offers.
YPSM ads AdWords*
Range of Cost-per-Call Experienced by Study Participants
Each point is one advertising
campaign
*Excludes two outlier participants who experienced > $400 cost-per-call on AdWords™
1Platinum Plus Listing on YP.comSM site, which is eligible for coverage on up to five categories. Most, but not all, participants had coverage on five
Page 3
AV&Co then created two parallel proxy websites for each advertiser, one for AdWords™ and one for YPSM ads. The proxy websites were identical to the advertisers’ original websites, but the phone numbers were replaced with the corresponding call tracking numbers for AdWords™ or YPSM
ads. The YPSM ads and AdWords™ listings were then linked to the respective proxy websites, so that we were able to track calls resulting from the two parallel campaigns.
Calls to each participant’s call tracking numbers were monitored for at least one month. We applied a filter to ensure call validity, excluding false leads such as multiple calls from the same number or telemarketing solicitations.
At the conclusion of the study, AV&Co combined all collected call data with cost information to arrive at cost-per-call results. AdWords™ cost data was provided by participants, who granted us direct access to their accounts or sent reports independently. The 16 participants paying for ad management reported management costs that we verified against benchmarks. Costs of YPSM ads were calculated from historical customer billing provided by YP, including costs of any points required to boost rankings of the listings.
YPSM ads Listing YPSM ads Landing Page
AdWords™ Ad AdWords™ Landing Page
Parallel Call-Tracking Systems (Illustrative)
Call Data — Spam Filtering Process
(212) 555-6041
(212) 555-5774
Different call tracking numbers
Same call tracking number
Page 4
Detailed Findings
The majority of participants in the study (77%) achieved better cost-per-call performance with YPSM ads than with Google AdWords™. In the chart shown, each point represents the results for one participant, with the vertical axis showing the amount spent per call on AdWords™, and the horizontal axis showing cost-per-call on YPSM ads. The diagonal line represents equal cost-per-call on AdWords™ and YPSM ads. Advertisers in the green area spent more per call on AdWords™ and those in the red area spent more on YPSM ads.
The spread of points on the chart highlights the wide range of cost-per-call on AdWords™ compared to YPSM ads. Advertisers run the risk of
spending much more per call with AdWords™, largely due to the high variability in AdWords™ cost-per-call. The relatively stable cost-per-call of Platinum Listings on YPSM ads (usually in the range of $15 − $100) magnifies the disparity. The small number (23%) of advertisers in the red area who spent more per call on YPSM ads generally paid only a small premium. In other words, points in the
red area are usually much closer to the diagonal line than those in the green area. Overall, the greater predictability of cost-per-call is another factor that would make YPSM ads a more attractive option for many advertisers.
In addition, AV&Co examined cost-per-call patterns by business category (e.g., dentists, florists). For each of the top 20 small business categories served by YP, we were able to recruit at least three participants (although some categories ultimately included only two advertisers, since those receiving calls from just one source were excluded). While this is still a relatively small sample, the next chart shows that YPSM ads are a better value on a cost-per-call basis for all but
three of the 20 categories.
Page 5
Study Considerations
Our findings indicate clear potential for better value when generating calls using YPSM ad Platinum Listings rather than using Google’s AdWords™. However, advertisers must also consider call volume needs: it may not be possible for an advertiser to meet its goals by placing ads solely with YPSM ads. A multi-pronged campaign using multiple advertising channels may be required for those seeking to strike a balance between volume and cost.
The study shows that per-call can vary dramatically by advertiser and medium. However, cost-per-call does not by itself provide all the information needed to evaluate advertising return on investment (ROI). An experiment to measure ROI would track individual prospects and use data on their eventual spending; such an analysis was outside the scope of this study.
An important consideration in our study design was determining the most effective way to conduct a “head-to-head” test of YPSM ads vs. AdWords™. We decided that a parallel test would generate more appropriately comparable results than two trials in series (e.g., one month of testing AdWords™ followed by a month of testing YPSM ads), because local weather or other conditions could have impacted business demand differently in the two time periods. However, any choice of experimental design has tradeoffs, and it is possible that cost-per-call may have varied if we conducted each trial separately rather than in parallel, or had varied other test conditions.
Page 6
We sought to recruit a representative sample of participants across multiple US cities that covered many business categories. The downside is that our limited sample size was further subdivided. The results we presented show consistent patterns, which lends credence to our results. But one should be mindful that the statistical significance is relatively low for any given business category.
Finally, despite attempts to remove ourselves from the advertising process to ensure impartiality, we occasionally needed to assist advertisers. For example, a few participants were unable to generate the 50 clicks we set as the AdWords™ minimum, so we offered tips on how to refine their campaigns. We do not believe our involvement in these rare instances biased the results one way or the other.
Google and AdWords are registered trademarks of Google Inc.
About this Study
In January 2012, Altman Vilandrie & Company was commissioned by YP—at the time known as AT&T Interactive and AT&T Ad Solutions—to conduct an independent study of cost-per-call performance. YP financed the study and provided logistical support but was not involved in the study’s execution or subsequent analysis. YP was also afforded the opportunity to review and comment on this paper before it was published, although Altman Vilandrie & Company retained final editorial control. The views and opinions expressed herein are those of Altman Vilandrie & Company and/or its members/associates.
Altman Vilandrie & Company is a strategy consulting firm that focuses on the communications, media, energy and related technology and investor sectors. Our consultants are experienced in strategy, marketing, finance, M&A, technology, regulatory, and operations disciplines. Based in Boston with offices in New York and San Francisco, Altman Vilandrie & Company enables clients to seize new opportunities, navigate mounting challenges, improve business performance, and increase investor value within complex and converging industries. Ninety percent of the boutique firm’s operating company clients are large- to mid-cap companies including service providers, content creators and aggregators, and equipment and software developers. Altman Vilandrie & Company’s financial clients include many of the largest and most prominent investors in the communications, media and related technology markets. More information can be found at
