What is SEM and how does Ad Rank Work?

Business Marketing Tyler Rice

by Tyler Rice
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Date Created | Dec. 19, 2017

SEM is known as Search Engine Marketing. While it can sometimes include the process of SEO, it is commonly referred to as the practice of using Paid Search.

This is also known as pay-per-click advertising. While there are many platforms for pay-per-click advertising, the most commonly used one is Google AdWords.

This topic is covered in other training programs but let’s touch upon the basics since it is relevant to the world of search engine optimization.

SEM Search Engine Marketing

Pay-per-click advertising works by allowing a business to bid for ad placements on search engines, affiliate sites, or social media platforms.

SEM Marketing Channels

For search engine advertising, this is done by placing a bid on keywords to be featured in the sponsored results of a search query.


Google AdWords Ad Rank Factors

The determining factor of placement among the sponsored results is called the Ad Rank. The Ad Rank is made up of many factors including the bid amount, quality, and format impact.

Ad Rank Factors

You might think that a search engine would just want to give the best ad placements to the highest bidder. But this goes against what search engines are all about.

Remember, the main goal of a search engine is to provide the best result for the consumer with their search.

For example, let’s look at the search query, “jewelry for sale in Seattle.” Imagine having two local businesses competing for that phrase. Let’s see how their Ad Rank pans out while evaluating the other factors.

Let’s say Business A sets a maximum bid at five dollars while Business B bids at three dollars.

Ad Rank Score


Google AdWords Quality Score

Next, let’s factor in the quality of each ad.

The quality score is determined by relevancy, click-through rate, and the landing page experience.

Let’s imagine that the quality score for Business A is lower due to a high bounce rate. Last, we factor in the impact of ad extensions and the format of each ad.

Business A has only one extension while Business B has multiple extensions including location, phone number, and sitelinks.

Even though Business A had a higher bid, after evaluating the other key factors, we see that business B received a higher Ad Rank score and will be placed in a better position on the search engine results.

With a low enough Ad Rank, an ad will not be shown for selected keywords. If the Ad Rank is sufficient, it could be placed in a lower position or even at the bottom of the search engine results.

If you are interested in help with optimizing your ads for a high Ad Rank, check out this PPC Advertising option.

Let’s look at how sponsored ads are placed with the organic results.

For example, if we search for “social media services,” we can see the paid advertisements listed in red above the organic results listed in blue.

Paid Search Results

While there are not always paid advertisements on a given search query, we can see that the phrase “social media services” is either the same or similar to keywords targeted by the companies with ads shown.


Click-Through-Rates vs. Organic Search Results

 So, what is the click-through rates of paid advertisements as opposed to organic search results? To find these metrics, we reached out to the marketing company Conductor to include data from a 2017 study on Web Channel Distribution.

They analyzed data from 30 websites in 6 different industries to find their results. The data spans over the course of one year and includes over 310 million website visits.

Conductor Research

They found that 64% of website visits were obtained through organic search results with only 6% of the traffic attributed to paid advertisements. The remaining website traffic consisted of direct searches, referrals, and social media.

Even with these numbers, companies tend to spend much more money on paid advertisements rather than optimizing web pages for better placement.

This presents a terrific opportunity for anyone looking to enter the field of SEO and provides phenomenal value for any company looking to employ a trained individual with these skills.

Need Help Starting a Google AdWords Campaign?

Let’s talk and see how we can increase your business ROI.


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