Search Engine Marketing (SEM) is a blanket term used to describe a variety of online advertising efforts. Like SEO, it is used to attract users to your site who will find your offerings valuable to them. When people think of Search Engine Marketing, they usually only think of the ads that are placed at the top and to the right of search engine results in search engines like Google and Bing. However, the term is also commonly used to refer to paid advertising on social platforms like Facebook, YouTube, Google+ and Pinterest; on many websites; in many apps and throughout the digital world.
This type of online marketing is also commonly referred to as Pay-Per-Click (PPC) advertising because you generally pay a certain amount each time somebody clicks on your ad, although there are also options for paying per thousand impressions on many online ad platforms.
Whether you’re referring to paid online advertising as SEM or PPC, there are some key elements you should understand before you get started.
Your ad placement through Google AdWords takes into account more
than your maximum bid because they want to show highly relevant ads to their users. Therefore, your ad position is determined using their Ad Rank algorithm. The three core elements of your Ad Rank are:
1. Your maximum bid.
2. Your Quality Score — including historic and expected click through rates (CTR), the relevance of your ad to the searcher’s query, and the quality and relevance of your landing page.
3. The expected impact of Ad Formats — including phone numbers,
sitelinks, and the presence of your website’s domain in the ad headline.
Interestingly, if your Ad Rank isn’t high enough, your ad may not show up at all because Google feels that it isn’t really relevant to the searcher’s query.
Using information from Google’s Ad Rank support pages and videos, we’ve put together the graphic below to help make it easier to understand.
As you can see, your ad position is not just about what you’re willing to
spend. Bidder #3 actually has a lower Cost Per Click (CPC) for a first position ad placement than Bidder #2 has for the second position because their Ad Rank is higher due to high estimated format impact. If Bidder #2 wants to move to first position, they can improve the quality of their ad or modify their ad formatting — improving the quality side of their Ad Rank — or they can increase their maximum bid — which will also increase their CPC.
Interestingly, Ad Rank is calculated separately for every search query your ad may be eligible for in order to determine if and where your ad will be placed.
While it is a complicated system, there is sound reasoning behind these
ranking algorithms. To quote Varian, “…it all goes back to the ecosystem that Google, our users and our advertisers all live in. When users see better ads, they’re happier and they’re more likely to actually click on those ads and that makes advertisers happier, which makes Google happy because with happy users and happy advertisers, we have more people using our system.”