Search Engine Marketing is a marketing strategy that optimizes a websites content to be search engine friendly, then promotes the website across the internet. Promoting the site consists of many things like publishing content to websites, blogs, contributing content to article directories and online magazines, and using all available mediums to get the word out about your site. These publications have a two fold effect on your site: they increase your link popularity and generate traffic from referring websites. This type of marketing is a long term investment that pays off increasingly over time. The initial investment is more than a paid advertising campaign, but the cost decreases and the performance increases as the marketing takes effect over the course of the campaign. When you stop paying for paid advertising, you loose all the investment and the benefits of the campaign. With an approach in Search Engine Marketing, the long term benefits far outweigh the cost from the continued benefit you receive after the initial investment. Maintenance of an SEO strategy also has a much lower cost than the cost of maintaining paid advertising.
Pay Per Click advertising, or the "Sponsored Results" in Google have a lower success rate than natural search results over the long term. Users tend to trust the natural results before the paid results, increasing the performance of natural search rankings.
Research has shown that the most popular click locations on a Google results page are usually listings one through five. The majority of clicks are located above the fold (before you scroll). Sponsored links do get traffic but searchers tend to favor the natural search results over the sponsored results.
There are three main types of paid advertising. The first type of paid advertising is in the search engines Sponsored Links that show up for a specific search term on the right hand side of the page in Google. Companies can bid on a keyword they would like to get traffic from. The sponsored results are cycled through for all websites that bid on a particular keyword, so your site will appear for a percentage of the searches, depending on the advertiser competition. As keyword competition increases the cost per click is higher, and the number of impressions is lower. Not only that, but searchers don't trust paid links as much as natural search results, so the click through rates are lower. These clicks do have a slightly higher conversion rate than natural search results but the net effect still make natural listings more favorable.
The second form of paid advertising we will look at is buying an ad on another website that ranks well for a search term. Companies can purchase ads on the homepage on websites with high traffic in hopes of converting the traffic into leads. As with other paid advertising spots, you may have to share ad space with all other advertisers, and your listing could show up for only a percentage of the website's visitors. You also are one level down from the top of the search query. Searchers must choose the website you advertise with, and then select you from the list of other advertisers. Sites charge between $100 and $2500 per month for the listings depending on how many viewers will see the ads, and these listing disappear as soon as you stop paying for them. There is no long term benefit that is gained from this type of marketing.
The other form of paid advertising is by using a service like Google Adwords. Google provides code to websites that want to display advertising for a fee. Advertisers bid on keywords, and pay for every click they get from other websites. This is a hard sell, because a lot of sites are built as "Adsense" websites, with a primary goal of getting paid by Google for their ads. They create pages that are stuffed with keywords and have high traffic, and collect from Google when people click on the ads. This drives the price of ads up, and decreases the overall advertising experience. You can set a limit on Adwords campaigns, but there is a good chance that your ads will appear on Adsense driven websites and not convert as well.
Organic (natural) search results have and always will be better. If you are looking for the best return for paid advertising, I would lean towards a sponsored listing in Google because of the nature of the listing being on the search results pages. If you can afford the investment and get a company that can really market the site right, then the return on organic search marketing will far outweigh a paid advertising campaign.
