Search Engine Advertising

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[edit] Search Engine Advertising

Search engine advertising (often called paid search advertising) is one type of Search Engine Marketing (SEM) and Pay-Per-Click (PPC) advertising that describes the techniques marketers use to optimize the display of a company’s advertisements in the paid or sponsored sections of the search engine result page. When a user inputs a query on a search engine, two main types of results are shown: the advertising results and the organic (or natural) search results. Any website could be listed as an organic result, whereas only sites who have active advertising accounts appear in the advertising results. The two algorithms that search engines use to produce these results are most often independent of each other. Every time a user enters a query, the algorithm that produces advertising results essentially conducts an auction, evaluating advertisers’ bids and the quality of their advertisements, to determine the “best” ads to show the user. Advertisers only pay their bid price when the user clicks on their ad, and this price is called a cost per click (CPC).

Google search page
Google search page

Unique Characteristics

There are three main characteristics of internet advertisements such as search engine advertisements and display advertisements (such as banner ads), which are often based on a cost-per-thousand impressions (CPM) or a cost-per-acquisitions model (CPA), that best distinguish them from other forms of advertising. Firstly, Internet advertisers are able to accurately track their return on ad spend (ROAS) whereas other forms of advertising do not provide such accurate tracking. Secondly, search engine advertising is accessible, as it allows companies to advertise nationally with small budgets. Finally, Internet advertisers can better target specific types of users. It is because of these reasons advertisers spent $13B in 2009 in SEM and it is expected to grow to $26B in 2014[1]. As of August 2010, there are two main search engine advertisement services: Google AdWords, which serves the Google search engine, and Microsoft AdCenter, which serves both Bing and Yahoo! search pages. Based on search volume, the market share is allocated as follows [2]:

  • Google – 71.59%
  • Yahoo! – 14.28%
  • Bing – 9.87%

Reasons to Use Search Engine Advertising

There are two main reasons advertisers utilize search engine advertisements: direct response and branding.

Direct response describes using search engine advertising with the goal of having users ultimately performing a certain action. When the user performs the action, which could include making a purchase, submitting a request for an estimate, asking for more information, watching a video, or downloading an application, this is called a conversion or acquisition. Conversion tracking often requires the advertiser to add extra code to the website so that the search engine advertising platform can record these conversions. With such tracking, advertisers can calculate a conversion rate, which is a percentage found by dividing the number of conversions by the number of clicks.

Branding means that an advertiser utilizes search engine advertising to control the message the user sees when searching for relevant queries on a search engine. Although the text that shows in organic search results can be difficult to manipulate (see Search Engine Optimization), advertisers have complete control over the ad text that shows in the paid search results. Furthermore, advertisers may find that their sites do not show in the first several search results because their websites do not have a lot of traffic or the natural search algorithm does not think that the site is relevant to the query. Advertisers may engage in search engine advertising so that their ads show highly in the results for more relevant queries because sites that appear in more prominent places of the search result webpage have a higher likelihood of getting clicked.

[edit] Cases and Examples

Information about Shoes of Prey’s Google AdWords success can be found here: Information about Trouve Media’s Microsoft AdCenter success can be found here: More examples can be found on these sites:

[edit] Most Commonly Used SEM Terminologies

[edit] The Advertising Algorithm

Placement on search can be important to search engine advertisers because sites that appear in more prominent places of the search result webpage have a higher likelihood of getting clicked. An auction algorithm determines this placement, and Google and Microsoft use similar algorithms to determine placement. Google gives higher placements to advertisers with a higher Ad Rank, which is the product of their max CPC bid and their Quality Score (Ad Rank = max CPC * Quality Score). If the an ad is clicked, the advertiser is charged the their max CPC bid divided by the next highest quality score of their competitors plus a penny (max CPC / next competitor’s Quality Score + $.01). One of the most important considerations of search engine advertising strategies is to find ways to improve quality score. Max CPC Bids

Advertisers are in full control of this component of the Ad Rank. The max CPC bid is the highest amount an advertiser is willing to pay for a click, although because the algorithm functions similar to a second price auction as described above, advertisers often pay less than this amount. Quality Score

Google does not release exact details on the part of the algorithm used to calculate quality score, nor does it give advertisers their exact quality score. An advertiser’s quality score is on a scale of 1 to 10 using decimals to differentiate between similar quality ads, but advertisers only see a whole number estimate of their quality score. Quality score is determined by three main factors: relevance, landing page quality, and historical performance of the ad.

Relevance determines how similar the user’s query is to the advertiser’s ad text, keyword list, landing page URL, and location. When keywords in the user’s query match a word in the ad text or landing page URL, the word is bolded in the ad so that the ad captures the user’s attention. Advertisers should note that the search engine algorithm may consider some synonyms or other affiliated keywords as relevant. Advertisers can also target their ads to users in or searching for specific geographic locations, and search engines will not show ads to users not looking for information about that location.

Landing page quality evaluates the degree of relevance the advertiser’s landing page is to the user’s query. The search engine’s algorithm will often have an index of keywords, images, and other items on the advertiser’s landing page, and use this index to determine the landing page quality.

If an ad has a better historical performance, it is more likely to show higher. Historical performance is mostly determined by Click-through rate (CTR) under the theory that this metric evaluates the appeal of an ad to a user.

[edit] Search Engine Advertising Accounts

In order to serve ads on the three main search engines above, advertisers must create at least one account on Google AdWords or Microsoft AdCenter. Although there may be one-time fees associated with opening an account, advertisers are not required to commit to spend a minimum amount once the account is open. Accounts contain multiple components including Campaigns, Ad Groups (where keywords are placed), and Ads. A best practice in search engine advertising is to structure the advertiser’s account(s) using the same structure as their website(s). If an advertiser has multiple websites, using multiple accounts may be the best way of managing their search engine advertising which can be managed by a My Client Center (MCC) Account or an AdWords API on Google or an AdCenter API on Bing and Yahoo!. Furthermore, each campaign should be dedicated to a category of products/services offered, and each ad group should be dedicated to a specific product/service within the category. For example, an advertiser who owns multiple retail sites may want each account dedicated to a different site, each campaign dedicated to a major brand sold on the site, and each ad group dedicated to a product within the brand.


Accounts can be comprised of multiple campaigns. Advertisers are wise to create separate campaigns for the main categories on their website such as for different brands or products on retail websites, different service types for service company websites, or locations if an advertiser has separate products/services for different locations.

Budgets can be set at the campaign level, and is often determined as a dollar amount per time period (day, week, or month). It is wise to set some type of budget because advertisers’ ads may be more popular than the advertiser expected and can accumulate a high cost to the advertiser if not capped. Spend can be manipulated so that this budget is a maximum or an average. Budgets set based on an average may allow for an advertiser to spend larger amounts during some parts of the time period than others, often depending on the ad rotation settings.

Ad Groups

Campaigns are subdivided into ad groups, which can contain ads and the keywords associated with these ads. Advertisers are wise to create separate ad groups for each main product or service they offer or groups of them.


The search engine’s algorithm compares the keywords in an ad group to the user’s query to determine if it should serve an ad within the ad group and where an ad should be placed. As previously mentioned, synonyms, plurals and related words (such as misspellings) may be considered relevant to a user query. Furthermore, keywords are not case sensitive. Advertisers should utilize the various keyword match types so that they can target their ads for the intended audience. Multiple tools exist so that advertisers can learn what keywords users input into search engines and what other words a search engine may associate with keywords. Max CPC bids are placed on individual keywords (sometimes called a keyword bid), although it is often easy to set bids to be the same across an ad group.

Broad match keywords are those that allow for ads to show when the user’s query contains the some or all of the keywords in any order, synonyms, plurals, or other affiliated keywords. Broad matched keywords often allow ads to be displayed to larger audiences than other keywords. Although this may be considered a benefit, advertisers should be careful not to serve ads to unintended audiences as this would drive up cost without producing conversions. When an advertiser wants to input a broad match keyword into an ad group, the keyword is inserted without any other punctuation, such as: key word.

Modified broad match keywords, a match type currently only available on Google AdWords, are those that allow for ads to show only when the user’s query contains all of the keywords in any order. This allows for advertisers to target more specific audiences than broad match keywords, but larger audiences than the other match types. When an advertiser wants to input a modified broad match keyword into an ad group, the keyword is inserted with plus signs in front of every word, such as: +key +word.

Phrase match keywords are those that allow for ads to show only when the user’s query contains the keywords in the exact order that the advertiser lists them. This allows for advertisers to target larger audiences than exact match keywords, but more specific audiences than the other match types. When an advertiser wants to input a phrase match keyword into an ad group, the keyword is inserted with quotations on both the front and back of the phrase, such as: “key word”.

Exact match keywords are those that allow for ads to show only when the user’s query matches the advertiser’s keyword. This allows for the most specific type of targeting that keyword targeting allows. When an advertiser wants to input an exact match keyword into an ad group, the keyword is inserted with square brackets on both the front and back of the phrase, such as: [key word]. Negative match keywords are those that prevent ads from being shown when the user inputs a keyword into the query. Advertisers utilize negative match keywords to ensure that that their ads do not serve to an unintended audience. When an advertiser wants to input a broad match keyword into an ad group, the keyword is inserted with a minus sign in front of the word, such as: -key word.


Ads are comprised of three main elements: the title, the body text, and the landing page URL. To draw attention to their ads, advertisers should make their ads compelling and contain a “call to action” which encourages the user to perform a specific act. It is also considered an effective practice to capitalize the first letter of every word of a CPC ad, although capitalizing entire words or random letters is not allowed.

Advertisers should also note that words within ads appear in bold font if they match words in the user’s query so that they will stand out to users as being the most relevant. Advertisers can use dynamic keyword insertion so that the user’s actual query appears in an ad. In the title, body text, or display URL, the advertiser can include a dynamic keyword insertion. The format of the dynamic keyword insertion is the open curly bracket, the word “keyword,” a colon, and the default text should the user’s query be too long for the line’s character limit. It should appear as follows: {keyword: default text}.

In Google AdWords and Microsoft AdCenter, advertisers can create multiple ads for one ad group. By default, ads will rotate, and performance (quality score) will eventually determine which ads show more regularly. Google allows advertisers to turn off this default so that ads show evenly. Microsoft does not allow such an option, but workarounds exist to ensure that multiple ads show approximately the same number of times.

Advertisers should be aware that misleading ads, ads that lead to irrelevant landing pages, and false display URLs are likely to violate the advertising policies of Google, Microsoft, and other CPC advertising providers or result in low quality scores. The following descriptions apply to Google AdWords and Microsoft AdCenter ads.

  • The title of the ad is displayed above the rest of the ad in larger, blue underlined font. It consists of one line with a maximum of 25 characters.
  • The ad text appears below the title but above the URL in black font. It consists of two lines with a maximum of 35 characters each.
  • The landing page URL is listed at the bottom of the ad in green font. It is limited to 35 characters. Advertisers should note that the landing page URL displayed (display URL) in an ad does not have to match the actual landing page URL. The domain name of the display URL must match the domain name of the actual landing page URL, but other modifications can be made. For example, although the actual landing page URL may be long and visually unappealing, an advertiser can make their display URL,, or simply As of October 2010, Google now allows for dynamic landing page URLs as well [3].

[edit] Dos and Don’ts


  • Plan the organization of the account(s); the organization of the website being advertised is often a good model to follow
  • Constantly assess strategy (for example: ROI or sales volume)
  • Monitor the account(s) and make adjustments often
  • Budget wisely, and monitor budgets
  • Use campaign settings options (geographic targeting, timing, etc.) to target the right audience
  • Utilize keyword tools to learn what keywords are similar or affiliated with other keywords
  • Only put relevant keywords into ad groups
  • Negative match keywords that are not relevant to your products or services
  • Include long-tail keywords in keyword lists to maximize conversions and ROI
  • Ensure that the keywords in an ad group are “tightly knit” (keywords that don’t fit belong in a different ad group)
  • View keyword-bid forecasts before setting bids
  • Create multiple sets of ads within each ad group and let the algorithm determine which ones to show based on previous performance
  • Experiment with different ad texts and keyword types to determine which ads and keywords are most effective
  • Write compelling text in ads and a “call-to-action”
  • Include commonly used words in ad texts so that they appear in bold font
  • Capitalize each word of the ad
  • Track performance of the account regularly
  • After changes are made (keywords added, ad text modified, etc.), monitor the impact closely in the hours and days immediately afterward
  • Consider using conversion tracking and analytics services to record what happens after the user clicks the advertisement
  • Use an appealing display URL, even if it differs from the actual landing page URL
  • Ensure that the landing page is the as relevant to the advertisement as possible


  • Think Search Engine Advertising will help organic search rankings (see Search Engine Optimization)
  • Use the same keyword in multiple ad groups
  • Use the same keyword with multiple match types
  • Bid on one-word, commonly used keywords without realizing the potential dangers of high cost and low conversion rates
  • Use misleading ads
  • Incorporate unconventional spacing, punctuation, capitalization, or repetition into ad text
  • Write generic phrases unrelated to the advertisement ("Click Here") or superlative claims ("Best")
  • Over-promise
  • Use other companies' trademarked terms (without permission)
  • Delete ads, ad groups, or campaigns with good performance histories (just "turn off" instead!)
  • Use the real landing page URL as the display URL (unless it's concise and appealing)
  • Make the landing page the website’s home page (unless the campaign is very general)

Relevant links

AdWords Certification Learning Center

Google AdWords Home

Google Certification Program

Microsoft AdCenter Home

Microsoft Advertising Certification

Google AdWords Keyword Tool:




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