The Basic Difference Between SEO and SEM
SEO stands for Search Engine Optimization. The basic principle behind good SEO is to make each page of your website search engine friendly. This means making sure the code, content and links are properly formatted for the search engines.

SEM stands for Search Engine Marketing. The basic principle behind good SEM is to market your website through affiliates and search engines in an effort to gain conversion. What this means is, you pay a website owner such as Google or Yahoo to be placed at the top of their “paid” search result pages and the effectiveness of your investment can be measured by conversion.

What is conversion?
Conversion occurs when a website visitor lands on your website and completes a desired action. An action could be purchasing a product, filling-out a contact form or downloading an executable program, if that is the desired result of your website marketing efforts. Listed below is the website conversion formula:

Anyone who meets with me to discuss website planning at Delaware.Net, understand pretty quickly that I am all about getting clients top position in the organic or “free” listings of the search engines by using SEO. It is rare that I find a client whose website is truly ready for SEM before needing some serious usability work, landing pages or calls to action placed properly in their website. Some clients come to me after spending tens of thousands of dollars and wonder why their efforts have not paid-off. Some of them do not even have an analytics solution, let alone CPC, CTR, Conversion or KEI reports to measure their ROI….. more about all that later.

Why do I recommend SEO first?
Search Engine Optimization is the key to success in Google, Yahoo and MSN (The Big 3). Anyone with deep enough pockets can throw money at the big 3 and be placed at the top of the “paid” search results using SEM but, it takes comprehensive planning, technical skill, and constant education/analysis to stay in the top “free” or “organic” position using SEO methods. Personally, I consider SEO more challenging and quite frankly, more fun! Also, people tend to trust the organic results more.

Don’t get me wrong, once a website is properly formatted for the new eyeballs you stand to gain from SEM, there are some challenges. It’s not just about throwing money at the big 3 to be #1, you have to utilize Keyword Tools and test Long Tail Terms or you will run out of money fast.

What is The Long Tail?
The Long Tail is a marketing term coined by Chris Anderson in 2004. He described the niche strategy of certain business such as Amazon.com or Netflix. The distribution and inventory costs of those business allow them to realize significant profit out of selling small volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items. The group of persons that buy the hard-to-find or “non-hit” items is the customer demographic called The Long Tail. This Definition is from Wikipedia.com, I couldn’t say it better.

Website Analytics
Now that you have your website optimized for search engines and you have identified a few Long Tail terms, you want to see the effectiveness of all this hard work, right? Behold the power of Analytics. Website analytics is not something new and there are a bunch of free and paid solutions available. There are some significant differences between each solution based on traffic, the kind of reports you need and graphic interface preference. Some are very hard to navigate but, have amazing power and some are clumsy and not very feature-rich but, provide enough power for the average website owner.

Below is a list of my favorite analytics solutions, in no particular order….

Some websites require multiple analytics solutions, I personally use 3.

Impressions and Click-Through-Rate (CTR)
When you place an ad or link on a website like Google or an affiliate network, you will receive reports that show an impression number. This impression number is the amount of times your ad has been displayed to users on the website. The Click-Through-Rate is the amount of times that website visitors have clicked on your ad divided by the number of times it has been displayed.

Cost-Per-Click (CPC), Cost-Per-Thousand (CPM) and Pay-Per-Click (PPC)
So, we have good SEO, we are using perfect Long Tail Terms and we have a solid Analytics Solution. Now we need to determine what all this SEM is costing us, right? This is where CTR, CPC, CPM and PPC come in to play. CPC and PPC are usually associated with each other, PPC refers to Pay-Per-Click and typically means, how much you are paying per click from a website. CPM refers to Cost-Per-Mille or Thousand. So with these 3 super-cool sounding terms in your vocabulary, you need to know what they do, right? Here you go.

Consider a campaign where payment is based on impressions, not clicks. Impressions are sold for $10 CPM with a click-through rate (CTR) of 2%.

1000 impressions x 2% CTR = 20 click-throughs

$10 CPM / 20 click-throughs = $.50 per click

KEI or (Keyword Effectiveness Index)
Keyword effectiveness index was first introduced by Samanta Roy and it was created to determine the value of keywords. KEI compares the number of searches for keyword with number of search results. the following definition is from the WordTracker website.

Suppose the popularity of a keyword is 4 and Google displays 100 sites for that keyword. Then the ratio between popularity and competitiveness for that keyword is 4/100 = 0.04.

Suppose that both the popularity and the competitiveness of the keyword increases. Assume that the popularity increases to 40 and Google now displays 1000 sites for that keyword. Then the ratio between popularity and competitiveness for that keyword is 40/1000 = 0.04.

Hence, the keyword has the same ratio between popularity and competitiveness as before. However, as is obvious, the keyword would be far more attractive in the second case. If the popularity is only 4, there’s hardly any point in spending time trying to optimize your site for it even though you have a bigger chance of ending up in the top 30 since there are only 100 sites which are competing for a top 30 position. Each hit is no doubt important, but from a cost-benefit angle, the keyword is hardly a good choice. However, when the popularity increases to 40, the keyword becomes more attractive even though its competitiveness increases. Although it is now that much more difficult to get a top 30 ranking, spending time in trying to do so is worthwhile from the cost benefit viewpoint.

A good KEI must satisfy all the 3 axioms. Let P denote the popularity of the keyword and C the competitiveness.

The formula that WordTracker chose is KEI = (P^2/C), i.e. KEI is the square of the popularity of the keyword and divided by its competitiveness. This formula satisfies all the 3 axioms:

Note that the formula for KEI is not unique. In fact, this is one of the nice things about the KEI. If, instead of using 2, you use any power of P greater than 1, the resultant formula will also satisfy the 3 axioms. For example, (P^1.5/C) and (P^3/C) both satisfy the 3 axioms. The exact power of P that you choose depends on how much emphasis you want to give to the popularity of a keyword viz-a-viz its competitiveness. Higher the power of P in the formula, higher will be the emphasis on popularity. If you are very confident about your search engine positioning skills, choose a higher value for the power of P. If you are not that confident about your search engine positioning skills, choose a lower value for the power of P (but the power should still be more than 1). Thus, the KEI can be adapted to your skill level! Feeling confused as to which power you should choose? Stick to 2. It maintains a nice balance between both popularity and competitiveness.

Although KEI is good indicator of keyword importance it does not say anything about quality of competition. While there might be couple of competing websites for specific keyword, the market can be taken by big companies with big technical and economical background hard to beat. Therefore KEI is good way to help determine keywords, but should not be the only measurement of determining the best keywords.

Keyword Density
Keyword density also has a formula. To determine your keyword density, divide the number of times a word appears on a page by the number of words on that page. There are a bunch of free, online tools that do this for you. My favorite is here.

Look for Part 2 of this article over the next few days.