Among web marketers, it is the big debate: SEM versus SEO. Sound like just a bunch of letters to you?

If you owned a web site, you wouldn't think so. SEO stands for search engine optimization, a process that seeks to boost a site's traffic by helping it rise within a search engine's organic, or un-paid, search results. It is often seen as the Holy Grail for internet marketers, as people tend to click those links over their paid counterparts. However, the conversion rate--that is, the number of shoppers that turn from browsers to buyers--tends to be lower in organic search listings.

Search engine marketing, popularly referred to as pay-per-click, on the other hand, is a form of internet marketing that promotes websites on search engine result pages through paid placement (In search engines, these links appear on the right side of the screen or they're highlighted at the top of organic search results.) The conversion rate from these paid links is 2.03 percent versus 1.26 percent from organic links, according a 2009 study from Engine Ready, an internet marketing company in San Diego. What's more, those clicking over from sponsored links also tend to spend more. According to the study, those who clicked through a paid link spent on average $11 more, or $117.06 versus $106.64, than those who traveled to sites via un-paid links.

The reason for the differential: Conversion rates tend to improve as shoppers progress through the buying cycle, says Alhan Keser, an SEM specialist at Blue Fountain Media, a boutique web site development and online marketing firm in New York. Although search engine users typically troll organic results to conduct online research, they start favoring sponsored links when they're ready to buy, he says. "Most people who click on ads are ready to be sold to; they are at the buying stage," Keser says.

Still, SEM can be expensive--especially for resource-strapped small businesses. Business owners normally set the price they're willing to pay for keywords--the words or phrases that internet users type into search engines--which may be purchased daily from search engines like Google's Adwords, Yahoo! Search Marketing and Microsoft adCenter. However, broader keywords and phrases are often pricier. Also, setting up an SEM campaign usually costs more initially, as marketers or owners may wind up choosing keywords that don't pan out.

Despite these potential pitfalls, here are seven tips for getting the most out of pay-per-click:

  1. Don't pick your own keywords
    Picking the keywords that will attract shoppers to your site can be tricky. While you'll want to select your company's name, as well as the name of your competitors, the key in determining other keywords is to keep an open mind, says Keser. "Talk to customers; see what words they use when they search for your products," he says. Note that the broader the search phrases, the pricier those keywords will be. To reduce your costs, consider opting for focused, relevant keywords.

    In 2001, Ian MacDonald launched a pay-per-click campaign for Century Novelty , a Detroit party supplies company that had just gone entirely online. Although MacDonald started out bidding on broad keywords such as "party supplies," over time, he started to get more specific in his keyword selections--choosing phrases such as "luau party supplies" or "Hawaiian party leis," for example.
  2. Use keyword tools
    Check out Google's Suggestion tool for help homing in on appropriate keywords for your business. You can also track what competitors are bidding on via a free version of SEMRush , which provides a list of keywords that other advertisers might be bidding on. Keep in mind, however, that the bid data is not reliable, Keser says.

    Other keyword research options include: Google Trends , which provides historical data on popular keywords and seasonal keywords, as well as old terms or up-and-coming buzzwords that may be cheaper if you secure them before others start bidding them up. EBay Pulse can also help marketers identify keywords and phrases that shoppers use.
  3. Monitor your results
    After you select some keywords, go for a test run. Just make sure you stay on top of whether they're working. To help you, check out various analytics programs such as Google Analytics and Yahoo! Web Analytics .

    For optimal keyword analyses, ensure that your keywords programs and your analytics tools are connected, suggests Keser. Owners purchasing keywords and sponsored ads via Google's AdWords, for example, won't be able to gauge their company's pay-per-click data, unless the program is connected to Google Analytics.
  4. Write compelling ads
    In crafting your company's pay-per-click ad copy, make sure it's free from errors and gets to the point quickly. Also, include a call to action, says Chris Lien, the CEO of Marin Software, a search marketing firm in San Francisco. Not only should you invite potential customers to click on your ad, consider including other inducements such as discount offers, promotions and free shipping deals that might get people to click over. If you do insert incentives into your company's ads, see if doing so has an effect on your company's conversion compared to times when you're not running a promotion, he says.
  5. Filter out undesirable clicks
    For companies just getting started in pay-per-click, it's common to want to be more inclusive than exclusive. After all, they're trying to win sales. However, considering that companies have to pay each time someone clicks on their link--even when they don't make a purchase--it's best to pick highly relevant keywords and then restrict your ad copy to include only certain prospective customers. For example, a credit-card issuer might only invite those with stellar credit scores to click over.
  6. Align ads with landing pages
    The last thing a web marketer should do is invite someone to buy something and then not direct them to the item that they want to buy, says Lien. When a landing page--that is, a web page that appears when shoppers click on an advertisement or a search-engine result link--doesn't match up with keywords or the company's ad copy, it can be a source of frustration for shoppers, he says.

    Instead, make sure the keywords, the ad copy and the landing page correspond. For example, if you're advertising a specific type of television, make sure that potential customers who click over can access a page on your site showing that TV, rather than directing them to a general merchandise page.
  7. Mind your quality score
    Similarly, the more closely aligned your keywords are to your company's products, the better your company's quality score will be, says Keser. The quality score, which is a measurement that search engines like Google use to determine the order of paid links on a search results page, is based on how relevant your keywords are to search queries, the number of times someone clicks on your company's link and the quality of your landing page. Of course, how much you're paying per keyword matters. However, the more relevant your company is to certain keywords also factors in, he says. Basically, you're trying build up a credit rating with Google. "As they see that your ads are getting lots of clicks, it makes them look better," says Keser. "The worst thing for Google is to serve ads that aren't useful for users; they will lose relevancy."

Smart Money

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