Dec. 9, 2004--After the success of the pay-per-click model in online advertising, companies are now starting to apply the same principle to the telephone.

This week Citysearch, a local search website, through a partnership with technology company Cirxit, introduced a new service that promises to let local merchants track business leads based on the number of phone calls they receive.

Under the new system, when a merchant advertises through Citysearch, the site provides a dedicated toll-free number wherever the merchant's contact information appears online, whether in advertisements, search results, a general information page or other listings on the site. Customer calls coming into this number are then tracked before being redirected to the merchant's actual number. Merchants are charged a fee per each call up to any predetermined advertising cap, after which the toll-free number is removed from the site and replaced with the untracked local number.

Where online pay-per-click advertising tends to work best for e-commerce businesses that are more capable of tracking customer movements online, this new service -- called PFP or pay-for-performance -- is aimed at merchants that either don't have a website or rely heavily on telephone inquiries or reservations, such as restaurants and hotels. The telephone-tracking method could eventually allow smaller merchants to better measure the relative effectiveness of their advertising efforts at driving customer traffic by tracing transactions back to their point of origin.

"While Citysearch has been intensely committed to building up our content and improving search results to provide the best local search experience for consumers, we have also been focused on delivering greater value to our merchants," said Citysearch CEO Briggs Ferguson in a statement. "Launching PFP-Calls is a direct response to meeting our customers' diversified needs."