The Difference Between SEO and SEM, Explained

October 27, 2025 - 15 minutes read
SEO and SEM may seem similar, but there are a few key differences that separate them.

The way that consumers search is changing. Because of the rise of AI Overviews on Google and AI chatbots like ChatGPT and Claude being used as search engines, people are typing in more detailed, human-sounding prompts. Think “what’s a good restaurant near me that serves vegetarian food, has a good rating, and is within 15 miles of me?” rather than “best vegetarian restaurants near me.”

What’s also changing is the way people receive answers. The results that they’ll see include AI Overviews, SEM ads, and SEO-optimized content. Because of this shift, businesses are seeing success from AEO (Answer Engine Optimization) and GEO (Generative Engine Optimization), which means it’s time to make sure that the content you publish online is readable by AI engines that serve such answers to consumers.

AI tools crawl the internet searching for straightforward, authoritative information that they can compile into a straightforward, authoritative answer. The best way to make your content searchable for AI tools is by publishing FAQs and in-depth blogs, like the AI Answer Blogs that we offer at Federated Digital Solutions – blogs that dive deep into a concept and answer questions in manners that make sense to AI tools, so the AI tools can make it make sense for your customers.

Let’s dive deep into how search is changing, what that means for SEO/SEM (and which is right for your business), and how to adapt to the ever-growing AI landscape.

The Current Digital Marketing Shift

Business owners are facing a major shift in digital marketing. For a long time, SEO has been viewed as the gold standard of long-term traffic, but 2025 has brought about changes that business owners can’t afford to overlook.

Research shows that, thanks to AI Overviews, organic website traffic is down significantly.

“Business owners are waking up to a difficult truth,” says Karlie Mandigo, a senior account manager at Federated Digital Solutions. “The digital marketing playbook from one, two, three years ago doesn’t work anymore. The traffic they counted on from SEO is disappearing. They need strategies they can actually control.”

On the other hand, search advertising reached $102.9 billion in the United States throughout the last year, representing 39.8% of digital advertising spend across the board.

The question isn’t whether SEO or SEM is better; rather, it’s which strategy delivers better ROI for your business right here, right now.

The Difference: Services vs Advertising

Let’s dive into what we’re actually comparing when we’re discussing the difference between SEO and SEM.

SEO (Search Engine Optimization)

SEO is a marketing tactic that boosts how your business ranks organically in search results. It’s about making your website a place that’s discoverable, reliable, and relevant to users and search engines.

A strong SEO strategy includes optimizing your website, building backlinks, creating content around the right keywords (ones your audience is searching for), and improving technical performance. However, even when this is implemented correctly and the work is top-notch, results aren’t guaranteed or quick.

Unlike paid ads online, SEO is a long-term strategy that relies on consistency and quality rather than an immediate result. While it takes time to implement, the payoff can last for a long time, through steady web traffic and a strong digital presence that continually grows. It also requires consistent tweaking as search engines change their algorithms.

SEM (Search Engine Marketing)

Where SEO is organic, SEM is advertising. This is when you pay to display your ads in search results. Whenever someone clicks on that ad, the money comes out of your pocket. When you run out of spend, your ads stop being delivered. This method is direct, measurable, and controllable.

What’s The Difference?

We like to compare SEO and SEM to produce.

SEO is like planting a garden. You’re pouring hard work into cultivating the soil, buying the right seeds, and planting them at the right time of year, then waiting for them to sprout and produce vegetables.

SEM is like heading to the produce section of the grocery store and picking out exactly what you need, right when you need it.

Both of these tactics are worthwhile and have their time and place; they simply serve different purposes and deliver results on different timelines.

The ROI Reality

Let’s get down to the nitty-gritty. On average, SEM typically has an ROI of about $2 for every $1 spent on Google Ads. The amazing part is that you can start seeing results like this in as little as a few hours after you launch the campaign. Your first conversion may happen the day your ads launch, and your first sale could happen the following day!

The timeline for SEO is much different. SEO can take between 6 to 12 months before results from your tactics start showing. Even when the results are in, tracking ROI can be tricky. You can’t be sure whether the lead came from your blog post, your improved meta descriptions, or backlinks you added at the beginning of your campaign. It’s often impossible to know for sure.

The Measurement Gap

There’s a significant measurement gap between SEO and SEM.

  • Over time, SEM provides clear cost-per-click, cost-per-conversion, and return on ad spend metrics. 
  • SEO’s indicators take months to materialize, and it depends on rankings, organic traffic, and estimated attribution. 
  • Nowadays, a majority of Google searches result in zero clicks at all. Meaning that even if you rank at the top of the list, your strategies might not deliver the results that they used to. 

SEO: Why Is Organic Traffic Collapsing?

SEO traffic has dropped dramatically since early 2024 across the entire internet, including for major publishers. HubSpot reported a 75% decline in traffic in 2024, which just so happens to be the same year that Google launched AI Overviews.

“There have been many cases where clients ask us why their organic traffic isn’t converting like it used to,” Mandigo says. “The answer is that consumers are getting what they’re looking for from AI Overviews, and they might not click on a search result at all.”

A problem like this isn’t going to simply go away. By 2028, Gartner predicts that organic search traffic could decrease by up to 50% as AI-powered search engines continue to grow. At this point, it’s built into the structure of digital marketing.

“SEO isn’t dead, but it requires a completely different approach than what we’re used to,” Mandigo continues. “Many businesses are still following organic playbooks and wondering why they’re not seeing results.”

Here’s the reality of what we’re looking at for SEO today:

Google isn’t out to get your business. They’re simply catering to what makes consumers happy. If someone types in a question and gets their answer without having to click on anything, they feel satisfied, and that’s what Google is aiming for. But that doesn’t make life easy for businesses that rely on organic traffic.

The SEM Advantage 

When organic visibility is uncertain, it’s reassuring to rely on something that you can control, and that’s paid search.

Investments into SEM strategies are estimated to grow, on average, about 8% per year, and with good reason. Paid search made up an estimated 39% of advertisers’ budgets in 2024, which puts it at the top spot when it comes to digital advertising channels.

That begs the question: Why are businesses leaning so heavily on SEM? As a digital marketing tactic, it offers several advantages:

  • You can launch a campaign in hours instead of months 
  • You can test out messaging, offers, and targets in real time 
  • You can scale up or down depending on the performance of your ads (and budget)
  • You can target specific locations, demographics, and even the time of day that someone sees an ad 
  • Paid search delivers for Google and advertisers alike, as Google’s ad revenue from Q1 in 2025 reached $66.9 billion (that’s almost ¾ of Google’s entire revenue!)

When you use SEM, you’re not waiting for success and hoping that it happens. Instead, you’re buying the visibility and traffic you’re striving for with the ability to view what’s working and what isn’t.

When To Use SEM, SEO, or Both 

As we’ve discussed, SEM and SEO strategies aren’t mutually exclusive. Understanding when to use which strategy comes down to what makes sense for your business goals, what stage your business is in, and your budget.

“The businesses that are seeing success right now aren’t choosing between SEM and SEO,” Mandigo says. “They’re being strategic about where they allocate their budget based on what they can control and measure. For many businesses, that means a 70/30 split that favors SEM.”

While this isn’t cut-and-dry for every business, here’s a simple guideline to help you consider which strategy is right for your business:

  • For Startups and New Businesses Between 0 to 2 Years: Lean heavily on SEM. You need customers right now, not in six months or a year from now. Use paid search to immediately reach your market, test your messaging, and start generating revenue. You can invest in foundational SEO like site structure and basic content, but only minimally to start with. 
  • For Businesses in the Growth Stage Between 2 to 5 Years: Still prioritize SEM, but feel freer to take on a more balanced approach. Keep up with paid search for a predictable flow of leads, but expand your SEO for brand searches and high-intent commercial keywords.
  • For Established Businesses of 5+ Years: Use an integrated strategy that incorporates SEO for brand strength and SEM for market expansion, competitive keywords, and seasonal campaigns.

Where Should You Invest?

There are plenty of variables that can help make your decision on whether to invest in SEO, SEM, or both.

Consider SEM when:

  • You need leads/sales as soon as possible
  • You’re launching a new product or service
  • You have a limited window of opportunity (seasonal sales, an event)
  • You want precise control over spending and results
  • You need to test out messaging before you invest in long-term strategies
  • You can’t afford to wait six months to a year for results 
  • You need detailed attribution and ROI reporting

Consider SEO when:

  • You already have established brand awareness
  • You have the freedom to invest without immediate return expectations 
  • You have a competitive edge in content creation 
  • You can focus on brand-specific searches (where AI Overviews have not yet taken over)
  • You can afford a 12+ month investment 
  • You understand that traffic does not always equal conversions

Finding What’s Best For You

In the digital marketing landscape of 2025, most businesses will benefit from using SEM. It offers the control and accountability that SEO can’t match.

To learn more about the differences between SEO and SEM, and to discern which tactic will work best for your business, get in touch with our experts at Federated Digital Solutions. We can create a strategy that’s tailored to your business!

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