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The path to self-sustaining revenues for free directory assistance isn't clear yet. But if there is any real money to be made, it is going to come from category search. Unlike name search, users don't have a clear idea who they want to use, so there is a super-premium attached to the lead.

1-800-SAN-DIEGO has had category search for some time, and now Jingle's 1-800-FREE411 has joined the fray. “It is a natural extension,” says SVP Lyn Oakes. “The length of call is longer,” and “advertisers put themselves in the mix.”

The way it works is that featured advertisers, with connection options, are read off first. Then the list keeps being read down in groups of five, ideally with more ad insertions in between. For non-sponsored listings, callers get a choice between asking for phone numbers or addresses.

Jingle's been testing the feature in six markets and to date has steered 6 percent of its callers to it. Oakes says category search is one way to ensure local advertisers can get heard over national franchise operations and aggregators. “The coffee shop is really local.” Readers can try out the service for themselves. I called 1-800-FREE411 and tried out “Atlanta” and “Buckhead.” It is a very efficient operation that is pleasant to use.

But not everyone thinks the service is a shoo-in for success. “Jingle will find that they will have very few people using it,” says 1-800-SAN-DIEGO head Mick Noordewier. “The category search capability will not grow until there is additional information that can be included, such as ratings and business hours. This will require another partner with that sort of content.” This, of course, is the route that Noordewier is pursuing. Maybe Jingle will pursue a similar route.

General Update on Jingle

While on the phone with Oakes (an interactive advertising pioneer with AOL, Flycast, Engage and we got an update on Jingle's progress. Normally, all you hear about is Jingle's tremendous burn rate as it tries to seed the market and win repeat business.

After a year in operation, Oakes says the company is up to 16 million calls per month. Repeat traffic is running up to 60 percent, and people who become customers tend to call back three to four times per month. “We're attracting a lot of new customers who don't customarily use DA. It is a growing category,” she says.

So far, the company has attracted 500 advertisers. Small businesses account for 40 percent, or 200, and come from local-oriented resellers such as Merchant Circle, Ingenio and Ziff Leads. “We're interested in sales channels with anyone who has small businesses,” says Oakes.

Some also come from self-service options on the Web site. But national advertisers such as McDonald’s and Absolut Vodka have been the low hanging fruit, and a bigger part of the mix. While the goal is to have category relevant ads, “McDonald’s can be put anywhere” on an upfront basis, which is CPM-based, she says.

A big question mark about the prospects for free DA is whether it can be economically provided via automation. Oakes says half the calls today are automated. But she also says live costs are definitely coming down. Live operator costs are in the local 20s (cents). But the blended average for each call (with automated calls) is 10 to 12 cents.

Oakes also says she expects to see synergies with some of the company's investors, which include Hearst, Liberty Media (former TCI head John Malone's holding company) and Comcast. The interest by the cable TV giants is especially interesting. “Comcast is getting into the whole phone thing,” she notes.

As for looming competition in the free DA space from AT&T and Verizon, Oakes expresses confidence that they won't be able to give up what she calls their “cash cow.” “It is a validation of our model, to some extent, but they can't replace dollar for dollar, so they'll be cannibalizing themselves.”

In fact, they face competition not only from free DA, but from SMS, search and multi-modal. To keep their revenues stable, she says, they have actually been raising prices. She also notes that their expertise is “not in advertising. It is in efficiently delivering information.” While there may have been some synergies between Yellow Pages advertising and DA, most don't have any relationship between the two units, she adds.

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