What is Search Engine Marketing (SEM)?

Search Engine Marketing or SEM is an form of paid advertising on a search engine. Sometimes SEM is used as a term that also encompasses Search Engine Optimization (SEO) but almost almost always refers to paid placement, paid inclusion or sponsored results.

The most common form of SEM is the auction for sponsored result incarnation popularized by Google. This version pits advertisers against each other via keyterm, geography, demography and ad quality and then allows them to bid for their position of choice. Understanding how to create compelling advertising not only increases your chances of gaining a customer it also potentially decreases the price you pay for the best ad spots.

There are NO Secrets but there ARE Strategies

Look at it from Google's point of view. They want to collect the most money from advertisers per click. One would automatically think that the highest bidder would be awarded the more preferable position. At it's simplest, Google can do some math. It decides that your ad is more compelling than your competitor's ad because you seem to get twice as many clicks as they do for a given set of keywords. Therefore, they can simply charge you one penny more than half of what they are charging your competitor and earn a higher profit off of you while costing you less than half of what it costs your competitor. Knowing this makes it easy to see how professional SEM consultation can save you loads of money. But there is SO much more to know.

For instance, what if you are receiving more clicks for an ad variation when it places you in the third position than when it places you in the first. You can tell Google you prefer this position and then it pits your buds against others in that price range. If you prefer this position you likely have a wealth of data that says your ads perform well there and Google will likely find it profitable to place you there for a lower bid than one of your competitors.

The intricacies of Google's Adwords' targeting system have been the subject of blog posts and indeed there is enough to know to fill a book.

Yahoo and Microsoft (MSN / LIVE) have similarly intricate systems but Google is by far the most documented and the most widely used.