The Santa Barbara, Calif.-based company is developing a “pay-per-call” service that allows companies to post a different customer service phone number on various website that advertises its products. If the call culminates in a sale, the website publisher receives a commission.
The technology helps ad agencies track the phone calls in much the same way online ad clicks are tracked.
Jason Spievak, CFO and co-founder of RingRevenue, says that the reason for the pay-per-call technology is that Internet users are comfortable buying books, CDs and even plane tickets with a click of the mouse.
But when it comes to complex transactions, such as refinancing a mortgage or buying a high-end home appliance, people often carry out research online. They then often finalize their purchases offline by placing a phone call.
The pay-per-call model is particularly suited for higher-priced purchases, Spievak says.
“No one clicks ‘Buy Now!’ on a $3,000 mountain bike,” he says. “You have a question, and so you call a listed toll-free number before buying the bike with your credit card over the phone.”
That “shop online, buy offline” phenomenon has taken a bite out of sales for many advertising-supported Internet publishers, says Spievak, who adds that he expects the company will be cash flow positive by next year.
This isn’t the first startup for RingRevenue’s founding team. The company’s managers previously worked together at CallWave, a voice-over-IP software and service provider that raised $28 million in venture capital before launching an IPO in 2000. Spievak, who was formerly CallWave’s CEO, says founders’ experience acquiring and managing millions of phone numbers will serve well at RingRevenue.
RingRevenue co-founders see a large revenue opportunity, Spievak says, because of the high likelihood that an ad that generates a phone call will lead to a sale. While a website visitor who clicks on an ad will then make a purchase less than 5% of the time, callers convert to customers at a rate of 30% to 50%, according to figures provided by RingRevenue.
The startup is one of several venture-funded companies with business models tied to Internet affiliate marketing, which enables publishers to collect commission on sales generated directly from advertisements on their websites. But there have been few recent deals in the space.
Mercent, a Seattle-based provider of software used by affiliate marketers, raised $13.5 million in venture funding in three rounds over the past four years.
The largest funding deals date back to the start of the decade. Affiliate marketing service providers Fastclick and Commission Junction raised $78 million and $50 million in venture funding, respectively, mostly around 2000. Both were later acquired by ValueClick, an acquisitive advertising provider that raised $3.5 million in venture funding before going public in 2000, and currently has a market capitalization close to $1 billion.