Passed on 22 May, 2025
3. An introduction to SEM
In this lesson, you’ll learn how the bidding process works in paid advertising and what factors influence ad rank. We’ll cover how bids, quality score, and relevance determine ad placement, helping you better understand how to optimise your ads.
✅ Learning objectivesBy the end of this lesson, you’ll be able to:Understand how the auction process works in paid advertising.Explain the factors that influence ad rank, including Max CPC and quality score.Identify how relevance and ad quality impact your ad placement.
Learning objectives
By the end of this lesson, you’ll be able to:
Understand how the auction process works in paid advertising.
Explain the factors that influence ad rank, including Max CPC and quality score.
Identify how relevance and ad quality impact your ad placement.
What is search engine marketing (SEM)?
Have you ever wondered how some websites appear at the top of Google Search result pages when you search for something? Understanding SEM can help, and in this lesson, you’ll learn how to use it to your advantage.
Organic results vs paid advertisements
Let’s say you type ‘wedding photographer’ into a search engine. You’ll get lots of options on the results page.
Organic results
Some links are 'organic' results. These are websites that the search engine's algorithms have determined are most relevant to your search query or keywords. They appear naturally, or organically, in the search results so they don't require any special payment or promotion.
Paid advertisements
At the top of the page, you’ll see links with tags like ‘sponsored’ or ‘ad’. SEM lets you use this space to advertise to potential customers when they search for certain words and phrases relevant to your business. These are known as keywords.
Why SEM works so well
Search engine marketing is a uniquely powerful option for your business. It’s simple but effective.
Pay per click (PPC)
The unique thing about SEM is that you’ll only pay when someone clicks on your ad. That’s why it’s called ‘pay-per-click’ advertising. With traditional forms of marketing like billboards or newspaper ads, you’ll pay no matter what.
Targeted advertising
With SEM, people who click your ad are likely interested because they searched for what you offer. SEM targets people based on the keywords and queries they input into search engines, unlike traditional marketing, which broadcasts to a broad audience.
Keywords
SEM helps you make sure your ads are found by the right people thanks to specific keywords and search terms that they use to find information, products, or services online. This means your ads are relevant and timely to potential customers.
The SEM auction analogy
Think about SEM as a kind of auction system. Every time a user enters a search query, an ad auction takes place. To participate, you identify the keywords you want to bid on and decide how much you’re willing to spend per click. This determines if your ad appears alongside relevant search results.Here’s how the auction works, along with an example to help you figure out how to make the most of SEM for your business.
Here’s how the auction works, along with an example to help you figure out how to make the most of SEM for your business.
Here’s how the auction works, along with an example to help you figure out how to make the most of SEM for your business.
How it works
Search engines limit the number of slot adverts that can appear on an individual page. Advertisers compete in an auction for those slots.After you search, the adverts that ‘win’ appear in more desirable slots on the results page—usually near the top, where they are more likely to be seen and clicked on by users. The ‘runners-up’ appear lower.
After you search, the adverts that ‘win’ appear in more desirable slots on the results page—usually near the top, where they are more likely to be seen and clicked on by users. The ‘runners-up’ appear lower.
After you search, the adverts that ‘win’ appear in more desirable slots on the results page—usually near the top, where they are more likely to be seen and clicked on by users. The ‘runners-up’ appear lower.
Keywords
Identifying keywords you want to bid on and clarifying how much you're willing to spend per click on each is essential.A quick search online will show you that there are many tools, free-of-charge and paid, that can assist you in this research.
A quick search online will show you that there are many tools, free-of-charge and paid, that can assist you in this research.
A quick search online will show you that there are many tools, free-of-charge and paid, that can assist you in this research.
Relevance vs cost
Like most auctions, advertisers place a bid. But it’s not all about your bid. In this auction, the relevance of your adverts is crucial as well. Success in the auction means having a competitive bid, as well as strong relevance. Getting both of these right is the recipe for success in SEM.
Quality score
Search engines usually use a quality score (1 to 10) to assess the relevance and quality of your ads, keywords, and landing pages to search engines. It factors in relevance (ad-to-query match), engagement (click likelihood), performance (conversion success), and ad quality (content targeting). A higher score improves ad placement and lowers costs, making it essential for SEM success.
Competitive bidding
Say you’re willing to pay up to £3 when people click on your ad. This price is often called your maximum cost per click (Max CPC). If your competitor has a Max CPC of £2, you’ll have a higher bid, meaning you’ll have an advantage in the auction.
Improving SEM performance
When two competing brands have equal bid prices, the brand with a higher quality score will appear higher in the results. One of the best ways to improve SEM performance is to consistently review campaigns to find ways to become more relevant.
Ad rank
Ad rank is determined by factors like Max CPC and quality score. These impact where your ad appears in search results. The highest ad rank gains the higher ad slots, ensuring that the most relevant ads win the auction, not just the highest bids.
Other factors
Other factors like ad extensions and the expected impact on user experience can influence your ad rank. Features such as call buttons or links to specific pages can boost your ad’s visibility and improve ranking without increasing your bid.
Meeting standards
While your bid matters, success in SEM isn’t just about bidding high. A higher Max CPC helps secure ad slots, but balancing competitive bids with optimised ads, relevant landing pages, and a strong quality score can help you succeed without always bidding the most.
Ways to boost your quality scores
Quality score is calculated by the combined performance of:Expected click through rate (CTR):likelihood of your ad being clicked when shown.Ad relevance:how closely your ad matches a user's search.Landing page UX:how usable and useful your landing page is.Here’s how to help boost your quality score.
Expected click through rate (CTR):likelihood of your ad being clicked when shown.Ad relevance:how closely your ad matches a user's search.Landing page UX:how usable and useful your landing page is.Here’s how to help boost your quality score.
Expected click through rate (CTR):likelihood of your ad being clicked when shown.
Ad relevance:how closely your ad matches a user's search.
Landing page UX:how usable and useful your landing page is.
Here’s how to help boost your quality score.
Here’s how to help boost your quality score.
Boost UX with relevant landing pages, fast loading times, and clear calls to action.
Ad text should closely match the user's search to improve relevance and attract clicks.
Landing pages need to be easy to navigate, relevant, and encourage the desired action.
✅ ActivityA good way of seeing SEM in action is to explore the effect of using different keywords in a search engine. Follow the checklist below and write down your observations for future reference.Check the items off as you go.Search for a handful of keywords relevant to your business or brand.What do you notice about the advertisers for these keywords?Which ads appear at the top of the page? Which ads appear lower?Can you see a correlation between relevance and ad position?
Activity
A good way of seeing SEM in action is to explore the effect of using different keywords in a search engine. Follow the checklist below and write down your observations for future reference.
Search for a handful of keywords relevant to your business or brand.
What do you notice about the advertisers for these keywords?
Which ads appear at the top of the page? Which ads appear lower?
Can you see a correlation between relevance and ad position?
Download PDF
Download PDF
Check your knowledge
You’ve nearly completed the introduction to SEM lesson. It's time for you to check and reflect on what you've learned so far.You must complete the knowledge check to move to the next lesson.
You must complete the knowledge check to move to the next lesson.
You must complete the knowledge check to move to the next lesson.
Question 1 of 3
Can you remember what PPC stands for?
Pay per cost
Pay per click
Pay by click
Pay per customer
Submit
Submit
Yes.SEM allows you to pay when someone clicks on your ad and this is known as pay per click, or PPC.Unlike traditional forms of marketing like billboards which you pay for no matter how they perform, PPC allows you to develop a better, and much more flexible marketing strategy for your business.
Unlike traditional forms of marketing like billboards which you pay for no matter how they perform, PPC allows you to develop a better, and much more flexible marketing strategy for your business.
Unlike traditional forms of marketing like billboards which you pay for no matter how they perform, PPC allows you to develop a better, and much more flexible marketing strategy for your business.
Question 2 of 3
Which of the following factors influence your ad rank?
The searcher’s internet speed
Your ad’s quality score
Your max CPC for that ad
The browser the searcher uses
Submit
Submit
Yes.Ad rank is determined by factors like max CPC and quality score. The highest ad rank gains the higher ad slots, ensuring that the most relevant ads win the auction, not just the highest bids. That means that these factors impact where your ad appears in search result pages.
Question 3 of 3
Which of these components contribute to your quality score?
Your max CPC
Expected click through rate (CTR)
Landing page UX
Relevance of the ad to the searcher
Submit
Submit
Yes.Your ad’s quality score is calculated by the combined performance of:Theexpected click through rate (CTR)of your ad, that’s the likelihood of your ad being clicked when shown to searchers.Thead relevance, which means how closely your ad matches a search term.Thelanding page UX, or user experience. Landing pages need to be easy to navigate, relevant, and encourage desired actions like sign ups and sales.
Your ad’s quality score is calculated by the combined performance of:Theexpected click through rate (CTR)of your ad, that’s the likelihood of your ad being clicked when shown to searchers.Thead relevance, which means how closely your ad matches a search term.Thelanding page UX, or user experience. Landing pages need to be easy to navigate, relevant, and encourage desired actions like sign ups and sales.
Theexpected click through rate (CTR)of your ad, that’s the likelihood of your ad being clicked when shown to searchers.Thead relevance, which means how closely your ad matches a search term.Thelanding page UX, or user experience. Landing pages need to be easy to navigate, relevant, and encourage desired actions like sign ups and sales.
Theexpected click through rate (CTR)of your ad, that’s the likelihood of your ad being clicked when shown to searchers.
Thead relevance, which means how closely your ad matches a search term.
Thelanding page UX, or user experience. Landing pages need to be easy to navigate, relevant, and encourage desired actions like sign ups and sales.
Lesson complete
Great job!You now understand how the auction process works in paid advertising, including the key factors that influence ad rank.Next, we’ll explore implementing SEM and putting these concepts into practice.
You now understand how the auction process works in paid advertising, including the key factors that influence ad rank.Next, we’ll explore implementing SEM and putting these concepts into practice.
Next, we’ll explore implementing SEM and putting these concepts into practice.
Next, we’ll explore implementing SEM and putting these concepts into practice.