Search Engine Optimization is the effort expanded to get a website ranked high on the free (organic, editorial, etc.) part of the search engine results for certain key phrases.
 
Search Engine Advertising is the advertising campaign to get a website listed as a “sponsor” on the search engine results for selected key phrases by paying a set fee per click through (pay per click) via a bidding process.

Here are a few comparisons between the two approaches:

Search Engine Optimization

Here are a number of things one needs to consider when embarking on a search engine optimization effort:

• Three main search engines are: Google, Yahoo and MSN in the market share order.They cover almost 90% of the search traffic on the Internet among them.
• Step 1 is to determine a set of best “key phrases” to target.The conventional wisdom is to select phrases that are popular but with less competition. At times, though, one needs to pay particular attention to the purpose of one’s website where “popularity” and “competition” may not be too relevant.
• “Relevancy” is the key to the search engine optimization process.In a final analysis, your copy must support the key phrases you are targeting. Furthermore, you want to make your copy interesting to your visitors.Write an honest to truth article about your products and services with emphasis to their uniqueness.A good copy serves a great starting point for a Search Engine Optimization professional.“Content is the king!”
• “Link popularity”, the number of links coming into your website, is one of the important factors for all search engines, and for Google in particular.Not only the number of incoming links is important, the “quality” of those websites linking to yours is important as well.Good places to have incoming links are reputable directories such as Chamber of Commerce, Visitors Bureau, Trade Organization, as well as popular sites.Cultivating link popularity requires effort and time.Stick with it!
• Search Engine Optimization is an on-going effort: New websites (hence your competitors) come to the scene everyday, and search engines refine their ranking algorithm all the time!

Search Engine Advertising

Here are a few points to consider when initiating a search engine advertising campaign:

• Establish a Return on Investment (ROI) goal first.At minimum, you must develop the metric of the $ profit generated per visitor to your website.This very important number will give you a solid guidance as to how much you can afford “per click” through.
• Perform the same key phrase analysis as if you were to perform a search engine optimization.
• When affordable, strive to be the top three positions.If you go with Overture, for example, top three sponsors also appear in Yahoo, Altavista and a number of Yahoo-affiliated search engines.
• Here’s another trick:If you cannot afford to be the top three, try to be “at the bottom on the first page”.The theory is that people have to scroll down to the bottom to get to next page.This tactic, however, requires very intense monitoring of your standing.
• Do a lot of testing.A great way to do it is to establish a ceiling, say $1,000 per month.This arrangement will set your exposure to $1,000 pay per click charge, beyond which the search engine simply takes you off the list.