Catching Up with UpSnap

When SearchLine last spoke to UpSnap Networks, back in November 2004, the Davidson NC-based company had just introduced a free SMS-based mobile business directory service. Users could send a text message to a registered contact number, specifying the kind of business they were looking for (e.g., “taxi’) and giving a locator such as the city, area or ZIP code they needed the business in.

Besides getting back a list of names and phone numbers from LookSmart’s directory, users would usually get a short click-to-call list of advertiser businesses in the category. They could click on one of those businesses, and UpSnap would initiate a call, then ring the user back to connect them. It was a way to link wireless with paid sponsorship and search, CEO Tony Philipp said at the time.

Fast-forward a year and a half. UpSnap still offers free 411 to mobile phones, and still uses the click-to-call featured listing system. But pay-per-call ads have been added to the ad mix, and UpSnap itself has added subscription-based audio content as a revenue stream.

Pay-per-call ads have been making inroads into mobile directory services both in Europe and the U.S., where Ingenio also offers ads on Jingle Networks’ 1-800-Free411 service. Philip says they’re “a no-brainer” for the mobile medium.

Of the 23 million businesses in the U.S., some 18 million are small concerns with fewer than five employees. The large majority of these are service businesses, everything from financial planning to home remodeling. It just doesn’t make sense for these businesses to direct customers to the Web with an ad click; their buyers are more comfortable when they can talk to a live human being.

Meanwhile, merchants who use pay-per-call services are usually being contacted by customers who are far along in their buying decisions, Philipp says, and therefore are much better qualified than those who click on a Web ad. For that reason, cost-per-call prices for a pay-per-call ad range from about $5 to $10, compared to an average cost per click of around 20 cents. But that price differential is also reflected in response rates. Philipp told an audience at ad:tech San Francisco in April that UpSnap mobile directory services have an average call-back rate of 22.5%, compared to a clickthrough rate for the average search ad of about 10%.

With those numbers, it made sense to open UpSnap’s platform up to other companies that can go out and recruit pay-per-call advertisers. “The way we’ve built our infrastructure allows us to work with other people,” says Philipp. “It was always our intention to partner with other companies that were aggregating the merchants and advertisers. And pay-per-call just makes fundamentally a lot more sense off a cell phone than it does off the Internet,” he says.

UpSnap has paired off its free text-based services—in addition to mobile directory, the company also offers SMS content ranging from package tracking, horoscopes, jokes and price comparisons to homeland security information and, most recently, avian flu alerts— with subscription-based live audio content, including streaming music channels, audio news and comedy, and live in-car audio during all NASCAR races, a service UpSnap mostly recently offered with Nextel. The fee-paid audio services are enabled by XSVoice, which UpSnap acquired in January of this year, and work with the SMS ad stream to help underwrite some of the costs of the free offerings.

What about threats from the big search players? Since UpSnap fired off its first text message, Google, Yahoo!, MSN and AOL have all done a lot of work to both sharpen their local search offerings and translate that data from the desktop to the mobile handset. How does Philipp view their efforts and the competitive challenge they pose to his company’s mobile directory service?

“When [Google, Yahoo! et al] put their feet out of bed in the morning, their focus is more on Web search,” he says. “When I wake up in the morning, the first thing I’m thinking of is phones. Does Web search on a phone really make a lot of sense? Do I really need to do academic research on dinosaurs on my phone? We’ve taken a vertical approach to structured data that offers airline arrival information on the phone, weather updates and movie times—the type of things that consumers want on the go.”

And while there may be a market someday for video ads over handsets or other glitzy mobile marketing, Philipp says that his company will stick with text messaging for the foreseeable future because it’s ubiquitous and works on almost any phone. “That way, we can tell merchants that anybody can get access to them through our platform,” he says. “We’re living up to the notion of ‘Anybody, anywhere.’”

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