What exactly is SEA? A definition of search engine advertising

What is SEA? For the economic success of many companies today, it is essential to be present through SEA/SEM advertisements on search engines and visible to potential customers.

The main interfaces for searching information, products, and services are the major search engines Google, Yahoo, and Bing.

Through Search Engine Marketing (also known as SEM), advertisers try to achieve better placements for their websites within search result pages.

Fig.1: The Google Search Engine Result Page (SERP) with Paid Search, Organic Search and Paid Shopping

There is a distinction between organic and paid entries on search result pages. Search Engine Advertising (SEA) refers to all measures related to the paid entries on the search engine. The term SEO, on the other hand, involves the optimization of organic entries.

The abbreviation SEM (Search Engine Marketing) is generally used as an umbrella term for both areas: SEA / Search Engine Advertising and SEO / Search Engine Optimization. In German, SEA is often translated as Suchmaschinenwerbung, meaning search engine advertising. Many users may not explicitly differentiate between organic and paid entries themselves.

The functionality and composition of the results are vastly different in each area.

In SEO, the ranking is based on the Google algorithm that evaluates all listed websites. However, placements in the paid area can only be achieved through SEA campaigns (see also Figure 2: The difference between SEO and SEA).

At Google, you can manage these with the advertising program Google AdWords; for Bing and Yahoo, there are Bing Ads. With a 95% market share, Google clearly dominates the search engine market in Germany.

New innovations in search engine advertising usually emerge from the Google AdWords platform and are then picked up by other competitors (shopping campaigns, enhanced text ad formats, etc.).

Fig. 2: The difference between SEO and SEA

Advantages of SEA Marketing

The competition for the greatest visibility is all about traffic. About 64,000 search queries are entered on Google every second worldwide. Those who offer the appropriate content have the chance to reach potential customers through this channel. Although listing in organic search result pages is not chargeable, optimizing the website for SEO and writing relevant content is often associated with high effort.

Positive effects typically only appear after some time. AdWords campaigns can provide helpful relief here. The marketing budget to be invested can be individually controlled. SEA campaigns can be activated and paused at any time.

The effect of search engine advertising is immediate in the form of additional traffic for the website. It is particularly useful for promoting time-limited campaigns or achieving short-term increases in demand. The text design options that AdWords provides for search campaigns also allow for creating extremely relevant advertisements with high value for the user.

SEA Marketing gives you the opportunity to reach potential customers exactly where they are most valuable to your company: At the moment they are searching for your product or service.

How does SEA work?

Search engine advertising operates on an auction model based on supply and demand. In this case, the supply is the maximum search volume of a keyword. Depending on user search behavior, the volume can fluctuate significantly, as shown by the graph for the keyword “gifts.”

The possible placements of ads in the search results are limited. Particularly the first four positions are highly coveted, as the likelihood of a click is much higher there. This leads to competition, which is determined both by user search behavior and the number of advertisers bidding on the keywords.

Just like in an auction house, the places on Google's search result pages are auctioned to the advertisers. The higher the competition and the maximum bids, the higher the estimated price for a listing.

How does the auction model work?

Even in search engine advertising, Google places great value on relevant search results. Advertisements should provide real value to users, match the search terms, and not just be perceived as pure advertising. To ensure this, Google has created the so-called Quality Score in AdWords, which aims to evaluate the quality of text ads for the user.

In addition to text design, which should match the entered search term, Google also evaluates the user experience on the landing page, i.e., the page the user lands on after clicking the text ad. Thus, the relevance is not only evaluated between text and keywords but also between text, keyword, and landing page. An important target metric beyond this is the click-through rate (CTR), which is the difference between ad impressions and clicks on the ad.

The more often an ad is clicked, the higher its click-through rate. With a high click-through rate, Google can assume that the ad is also considered relevant by the user.

Fig. 3: The three criteria for calculating the Quality Score

In addition to the quality and relevance of the advertisement, the advertising budget also plays an essential role. Since billing for search campaigns in AdWords is based on the click (and not the ad impression), advertisers submit a maximum Cost per Click bid (max. CPC). This indicates the maximum amount they are willing to pay for a click.

As mentioned, Google does not only use this bid for auctioning ad placements but also evaluates the Quality Score for the keywords.

Advertisers who optimize their SEA campaigns in AdWords and improve the Quality Scores have advantages in the auction compared to other bidders. The achieved ad rank in an auction is calculated using the following formula:

• Ad Rank = max. CPC x Quality Score

This relationship can be illustrated with an example (see Figure 4: Calculation of Ad Rank). If, for example, three competitors bid on the same keyword (in reality, there are, of course, many more), with corresponding CPC bids and Quality Scores as shown in Figure 4, Competitor C would win the bid for the first position, even though they submitted the lowest Cost per Click bid.

Competitor A, due to a poor Quality Score, would even end up in the 3rd position. Hence, it's worth investing some effort into SEA optimization.

Figure 4: Calculation of Ad Rank

Keyword Targeting and Other Targeting Options In search engine advertising, everything revolves around the keyword. It controls which search queries the text ads should be displayed for. It's important to differentiate between the search query and the keyword. The search query refers to the text entered by users in the search field of the search engine. The keyword, however, does not have to exactly match this input. The choice of keyword is as important as its keyword match type. Various match type options regulate how closely user search queries must align with the booked SEA keywords. For example, selecting the keyword "online marketing agency" with the "Exact" keyword match type will only serve ads if users enter search queries with that exact word (or a close variant like "online marketing agencies"). The "Broad" match type would have a much broader connection.

The text ad could then also be displayed for search queries such as "online marketing podcast," "search engine marketing agency," etc. Google and Bing offer a total of four different match types to finely adjust the level of this match.

In addition to the primary keyword targeting, there are other settings manageable in SEA campaigns. Ads can be shown based on geography so that different campaigns can be targeted at major cities, allowing users in each location to see unique ad texts. Ads may also be scheduled to run on specific weekdays or at specific times. This is often beneficial in the B2B sector, as ads shown on weekends tend to be less effective. It's even possible to optimize search campaigns according to age groups and gender. Google or Bing analyzes user behavior to statistically determine demographic belonging probabilities. Lastly, retargeting (called Remarketing in Google AdWords) plays a vital role in SEA campaigns.

AdWords Remarketing lists can be combined with search campaigns. For instance, ad texts can be shown exclusively to users who have already visited the advertiser's website. The same principle applies to Bing.

Ad Texts

Since spring 2017, Google and Bing have updated the rules for creating text ads. With the new Enhanced Text Ads (ETA) format, more comprehensive ad texts can finally be crafted. The text ad comprises various text blocks (Headline 1, Headline 2, Description, etc.) configured in AdWords or Bing Ads. Each block has a maximum character limit.

The limit for headlines is 30 characters each, and descriptions may convey up to 80 characters. Together with the final URL, i.e., the landing page users reach after clicking the ad, and the displayed website URL, the complete text ad is formed (see Figure 5).

Figure 5: The AdWords text ad including related ad extensions

Text ads can be augmented with various ad extensions to provide extra information. The “Callout Extension” is suitable for promoting the key USPs of the website.

The “Sitelink Extension” is great for linking to sub-pages and enabling direct navigation there. Google AdWords offers a range of new extension types to make ad presentations even more relevant.

Other ad extensions include: Snippet Extension, Call Extension, SMS Extension, Location Extension, Price Extension, App Extension, Review Extension, and Offer Extension.

Whether the extensions appear for a basic text ad is automatically determined by Google and depends on the specific search term. However, ads worse than position four generally do not trigger extensions. High click-through rate ads are more likely to display multiple extensions simultaneously.

Combined with the extensions, the display could be several times larger than the ad could stand alone. This, in turn, markedly boosts the ad's click-through rate.

Conclusion

Understanding the basic system of SEA Marketing is not challenging. In addition to the marketing budget, it's primarily about optimizing the relevance between the keyword, text ad, and the corresponding landing page. Of course, ad clicks still incur costs even with optimally set SEA campaigns.

However, click costs can be significantly reduced. It has also been shown for many advertisers that traffic from Google and others is essential for business success in the digital space.

Limiting online marketing measures to organic search results (SEO) alone is usually not enough to generate sufficient traffic. Paid ads occupy much more prominent positions (positions 1-4).

Furthermore, the extensive design options for text ads and precise targeting capabilities make search campaigns highly important and performance-oriented. Since ads run based on the user’s search term, potential customers can be reached exactly when they are looking for a product or service.

The likelihood of a purchase or other conversion is particularly high in this situation.

Fig.6 Glossary for SEA Terms

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