Search engine optimization focuses on organic search engine results.
Organic search results are generally the larger column of results found on the left side of search engines. The search engine’s algorithm determines the order of organic results.
Paid search results are generally the smaller column of results found on the right side of search engines. Paid search results are also commonly placed in a box above the organic search results. Their order depends on the system used by the search engine. The system can range from simple (the listing of the advertiser who pays the most is at the top), to much more complex (using multiple factors to determine the order of the results).
Because search engine optimization = organic search results, many people assume search engine marketing (SEM) = paid search results. However, most experts agree that SEO is actually part of search engine marketing.
In addition to search engine optimization, SEM does also include paid search results.
There are a variety of paid search result systems among second and third tier search engines. But, within the three major search engines (Google, Bing & Yahoo), the paid result system is the same: pay per click (PPC) advertising.
PPC advertising is a system that only charges advertisers when their ad is clicked. An ad may be displayed 100 times, but if it’s only clicked 8 times, the advertiser will only be charged for the 8 clicks.
Currently, each of the three major search engines has their own PPC advertising system. Google has Google AdWords, Bing has Microsoft adCenter, and Yahoo has Yahoo Search Marketing. However, Yahoo has started transitioning their Search Marketing users to Microsoft’s adCenter, and the full transition is scheduled to be complete by the end of October.
While each PPC advertising system works differently, all three not only take the amount an advertiser bids into account, but other quality factors like clickthrough rates and relevance, as well.