Revenue is undoubtedly the driving force for search engines and this all-important revenue comes from advertisers. Advertisers choose to have their ads appear when specific keywords are entered. These ads can be in the form of graphic banners of all shapes, text links, or even the dreaded pop-ups on some search sites.

Online advertisements on search engines can be differentiated into two categories: Impression based and Cost-Per-Click Based. Impression based advertisements are mostly graphical ad units and offer some form of branding in addition to being a direct response vehicle. Advertisers pay search sites to advertise in specific categories or for specific keywords, paying for each time the ad appears, or impression.

The performance based advertising i.e the Cost-Per-Click (CPC) is the most familiar form of search engine advertisement. In this arrangement, advertisers bid on keywords, agreeing to pay a certain amount for each person that clicks on the ad. Advertisers have extreme flexibility in the amount of spending and placement of these text ads. The amount bid for a key phrase determines the position of the advertisement on the page, with the highest bidders being placed higher on the page.

Separating Natural Listings and Paid Listings
Search engines display both natural and paid results on their result page; the natural results are the search site’s best attempt at answering your question and the reason most users visits the site. The paid listings are how the search sites stay in business. There has been a lot of confusion among the users related to natural and paid listings, the Federal Trade Commission has been confronting search sites and asking them to better delineate between natural listings and paid listings.