What Is Search Advertising? How It Works, Setting a Budget and Running Campaigns
Reviewed by HIROKI TAKAYAMA (Director and CGO, NowVillage Inc.)
Contents
Search advertising: the activity most likely to be taken on when you turn to digital marketing.
This article starts from “what is search advertising?” and
briefly covers its advantages and disadvantages and the costs involved.
Summary
・Search advertising is paid advertising shown alongside search results
・Its greatest strength is immediacy: you can reach users with a clear need straight away
・The cost model is pay per click: you pay only for the clicks you get
・Search advertising can be started on a small budget
・Raising the quality of your ads lets you aim for a top position at a lower bid
・There are three options for running it: hand it over to an agency, use a tool for efficiency, or run it yourself and bring it in-house
▼Who this is for
・Anyone who wants to attract customers in the short term rather than over the medium to long term
・Anyone who wants to understand search advertising
・Anyone who wants to know how to set a budget and how to get ads live
・Anyone weighing outsourcing against running it in-house and unsure which suits them
1. What is search advertising?
Search advertising is advertising shown on search engines such as Google and Yahoo!, triggered by the keywords (search terms) a user types in.
It is also known as search-linked advertising or PPC (pay per click) advertising.
Its defining feature is that it reaches, with real precision, the people with high purchase intent who are looking for that information right now. Return on investment (ROI) is easier to see than with other forms of web advertising, which makes it the essential activity for getting results quickly in small and medium-sized business marketing.
1.1 Where search ads appear
Search ads appear at the very top and the very bottom of the search results page (SERP) on search engines such as Google and Yahoo!.
There are around one to four ad slots at the top of the results.
This is the area a user sees first, above even the top organic (SEO) result, which makes it the most visible and the most likely to be clicked.
There are around one to three ad slots at the bottom of the results.
This area appears when the user scrolls right to the bottom. The click rate is lower than at the top, but it catches the eye of motivated users who have read the whole page.
1.2 The format of a search ad
A search ad is made up of the following asset elements.
| Ad asset name | Details |
|---|---|
| Headline (title) | The line that stops the user first, up to 30 characters |
| Description | Text of up to 90 characters setting out your service’s strengths in concrete terms |
| Display URL | The destination domain |
| Sitelinks | Shows direct links to other pages, such as enquiries or case studies |
| Callouts | Highlights benefits such as “available 24 hours” or “number one market share” |
| Image asset | Shows a product image beside the text to make the ad more visible |
| Structured snippets | Lists the types of service or the brands you carry, to signal expertise |
▼Example
To get ahead of competitors, making use of ad assets (formerly known as extensions) is essential. Setting these up carefully widens the area your ad occupies on screen and tends to raise the click rate.
1.3 The difference between search advertising and organic search (SEO)
The results page shows two things: the ad slots, which are the search ads, and everything else, which is organic search.
First, let us see where each of them appears, in an image.
In the image below, the red frame is search advertising、the blue frame is organic search
The big differences lie in whether there is a cost and whether you can control it.
| Item | Search advertising | Organic search (SEO, organic search) |
|---|---|---|
| Cost per click | Paid (charged each time the ad is clicked) | Free (no charge however many times it is clicked) |
| Immediacy | Extremely high (ads can go live the same day) | Low (months or years to reach a top position) |
| Adjusting your position | Broadly possible (you can aim higher by raising your bid) | Not possible (it depends on how the algorithm rates you) |
No charge arises when a user clicks a link to a site shown in organic search.
With search advertising, by contrast, the advertiser is charged each time the ad is clicked, which is why it is also called paid search.
Organic positions are also decided by the search engine’s ranking algorithm. That makes it very difficult to control directly what is shown, which search keywords it is shown for, and the content that appears.
1.4 Types of search advertising
The term “search advertising” usually refers to search-linked advertising, but in the broad sense display advertising is a form of it too.
The two differ a great deal in the audience you can reach and in how the ad looks. Using them correctly for the audience in question decides whether the work succeeds.
Display advertising (banner advertising) is advertising in image, video or text form shown within the content of websites and apps. Google’s GDN and Yahoo! JAPAN’s YDA are the leading examples.
Display advertising can use images and video, so it catches the eye,
and it can reach people who are not yet actively looking, which can build awareness of a product or service.
Remarketing (retargeting) is also possible: a useful feature that follows up users who once showed interest in your website and leads them towards a purchase or an application.
2. Three major advantages of running search advertising
Search advertising lets the advertiser control the detail of what is delivered, so with the right strategy it can be extremely cost-effective. Here are three advantages that owners and marketers should know.
2.1 It reaches people with high purchase intent directly
The greatest feature of search advertising is that you can show an ad to a user who searched a particular keyword, at the moment they searched it.
The user has decided they need a solution of some kind and is searching to find it.
Show, as an ad, the answer the user wants at the moment they search,
and the chance of a click rises sharply.
That is how you reach prospects with high purchase intent directly.
2.2 Immediacy and flexible control prevent missed opportunities
With search advertising, as soon as you pass review by Google Ads or Yahoo! Ads, your ads can go live the same day.
So you do not miss the moments when you need customers now, such as a new service launch or a time-limited campaign.
You can also control what is delivered, over what period, and how much you spend per day entirely as you wish, and because you can improve the ads in real time against detailed measures such as clicks, conversions and impressions, you can identify what is working, concentrate the budget there and stop advertising money leaking away.
This immediacy, and the degree of control, are what make search advertising so good.
2.3 Costs can be kept down
Search advertising can be run effectively on a small budget.
The reason lies in how it is charged.
Search advertising charges you when a user clicks the ad (pay per click).
It is not charged per impression, so you only spend money on people who have shown an interest in the ad.
The amount charged for each click is called the cost per click (CPC).
Cost per click is decided by a number of factors, so the advertiser does not know it at the point of bidding.
For cost per click, on Google Ads you can use “Keyword Planner“, and on Yahoo! Ads “the Yahoo! Keyword Advice Tool” to find out the forecast figure.
Using this tool you can choose the best keywords, taking into account the maximum you can spend and the click rate, which makes it easier to set a sensible budget in light of competitors and search demand.
Search ads also need a title and a description, but both are text, so creative costs are vastly lower than for other kinds of advertising.
And if you meet the conditions, on Google for example you can get ads live with a prepayment of 1,000 yen, which makes it very cheap to start compared with other forms of advertising.
3. The disadvantages of search advertising and points to watch
Search advertising has many advantages, but there are also disadvantages and difficulties to understand in advance.
Grasping these and taking proper steps against them is what decides whether the work succeeds.
3.1 Running it takes ongoing cost and effort
Search advertising can be started on a small budget, but running it takes knowledge, effort and time, so staff cost is unavoidable.
Getting results depends on work grounded in specialist knowledge, such as keyword selection, analysis of the numbers and improving ad copy, and that means committing internal resources.
Nor does it end when the ads go live; checking performance day by day and keeping it maintained takes time as well.
Where there is nobody in-house with the knowledge, it is common to hand the work to an advertising agency, and that incurs a management fee of some tens of per cent of the spend.
3.2 Users who avoid ads are hard to reach
A certain number of users unconsciously skip the area of the results page marked “sponsored” or “ad”.
Not being able to reach users who avoid ads is another disadvantage.
The article below sets out what to do when ads are not being clicked, from the point of view of how they are set up.
If your click rate is low, do take a look.
Five reasons search ads are not clicked, and what to do about it
3.3 There is a risk of cost per click rising sharply as competition intensifies
Search advertising is an auction, so the more popular the keyword, the fiercer the competition.
Position is also decided by the bid, so on popular keywords that competitors are going after too, competition becomes very fierce and the return can suffer.
Weigh the advantages against the disadvantages, and if the disadvantages win out, one option is to commission an agency that specialises in search advertising management.
4. How search advertising costs work and how to set an advertising budget
The cost of search advertising is decided by two mechanisms: pay per click, and an auction based on bids.
4.1 Pay per click
Pay per click (CPC: cost per click) means a cost arises only when a user actually clicks the ad.
However many times it appears in the results, there is no charge if it is not clicked.
The formula
Cost per click (CPC) = advertising spend ÷ clicks
If 10,000 yen of spend produced 100 clicks, for example, the CPC is 100 yen (10,000 yen ÷ 100 clicks).
The cost of running the ads can be expressed as clicks × cost per click = advertising spend.
4.2 How the actual cost per click is decided
Cost per click is decided by auction against competitors.
The advertiser bids, in the form of “I will pay up to this much per click”, and an auction is held among the companies that have bid.
How the auction decides cost per click can be expressed as a formula.
The formula for the actual cost per click
Cost per click actually paid (yen) = (the ad rank of the competitor placed immediately below you ÷ your quality score) + 1 yen
※Ad rank = bid × quality score (ad relevance, landing page usefulness and so on) + the effect of your ad assets
As that shows, pay per click requires you to take account not only of your own bid but of the quality of your ads and the position of competitors.
Raise the quality of your ads (your quality score) and you can appear above competitors on a lower bid, and keep the cost per click you actually pay down.
4.3 How to set an advertising budget that will not fail
As of 2025, optimising automated bidding by AI requires a certain volume of data (clicks and conversions).
So the standard approach is to build the budget in one of the following three ways.
①Where you cannot spend much, or are not yet committed to advertising
⇒Start with a test at 100,000 to 300,000 yen a month
For a small or medium-sized company, or a first attempt, starting in this range, identifying the keywords that produce results and then widening the budget is the lowest-risk approach.
②Where you want to work the numbers out to some degree before you start
⇒Work back from your target cost per acquisition (CPA)
Decide how much you can pay for one closed deal, and multiply by your target number.
(Example) target CPA 10,000 yen × monthly target of 30 = a budget of 300,000 yen
③Where you want to decide in light of going rates in your industry
⇒Work out the budget you need from the going cost per click (CPC)
You may be thinking of running on 50,000 yen a month, but if the going cost per click in your industry is 1,000 yen you will get only 50 clicks a month, one or two a day. That leaves the AI short of the data it needs to learn and optimise, and raises the risk of failure.
Research the going rate, work out how much you can pay for a single click (your acceptable CPC), and set a budget that secures enough clicks.
Because you can change the budget on search advertising freely at any time, you can add to it when results are coming and win larger results still.
Conversely, when results are not what you hoped for, having to keep finding the spend is a burden. Decide in advance the line beyond which you will not accept further cost.
That lets you avoid the risk of carrying on running ads without the results you wanted.
Preparing so that you can respond flexibly on cost will raise your chance of success further.
5. How to get search ads live
Search advertising can be set up entirely online, from the ad management screens of Google or Yahoo!.
It can be started quickly, but how precisely each step is set up has a big bearing on the results that follow.
5.1 Creating an account
First, open an ad account to manage the advertising from.
・Choosing a platform
In Japan you choose Google Ads, which has the larger share, or Yahoo! Ads, which is strong among desktop users and people in their forties and above, or both.
・Entering basic details
Register your company name, your website URL and payment details such as a credit card.
・Setting up the campaign
Choose a campaign type to match the aim of the advertising: sales, lead generation, website traffic and so on.
5.2 Choosing keywords
Work out what words users looking for your service will search, and choose the keywords you register.
・Using Keyword Planner
Use tools such as the one Google provides to research the monthly search volume and forecast cost per click for each keyword.
・Choosing match types
Adjust how widely the ads are shown: only on an exact match, or broadly across related searches (broad match).
・Setting negative keywords
Register in advance the keywords you do not want ads shown for, to prevent wasted clicks from users outside your audience.
5.3 Writing the ad (the creative)
Write the headline and description that will appear in the search results.
・Responsive search ads
The current mainstream is to submit several headlines and descriptions and let the AI test combinations automatically.
・Stating the benefit
Set out in concrete terms what the user gains by using the service, such as same-day turnaround or the lowest price in the industry.
・Adding ad assets
Fill out assets (extensions) such as phone numbers and sitelinks to increase the area you occupy on screen and raise the click rate.
5.4 Payment and review
Before the ads go live you need to fund the budget and pass the platform’s review.
・Payment settings
Choose prepayment (bank transfer or card) or payment in arrears (card) and fund the account.
・Ad review
The keywords and ad copy you submit are checked against each platform’s policies (no exaggerated claims, the Pharmaceuticals and Medical Devices Act, trademark rights and so on). This usually takes one to a few working days.
5.5 Going live and improving
Once review is passed, the ads go live. The real value of search advertising lies in the improvement that follows.
・Analysing the data
Check in real time which keywords led to a closed deal (a conversion).
・Adjusting bids
Use automated bidding by AI to optimise how hard you bid against your target cost per acquisition (CPA).
・Improving the landing page
Check that the page people reach after clicking matches their expectations, and keep working to raise the conversion rate (CVR).
※The article below goes into more detail on the key points in producing a landing page. Do read it alongside this one.
Related article:[Keep this one] Landing pages that deliver: the winning structure
6. Three ways to run search advertising
To run search advertising effectively and grow the business, how the work is staffed, who runs it and how, matters enormously. Choose the approach that best fits your own resources, your budget and how quickly you need results.
6.1 Commission an advertising agency
This means entrusting the work to professionals with specialist knowledge.
To be sure of results, handing the work to professionals at an agency with deep knowledge of the advertising industry is the safe course.
The advantage is that you get work based on the latest platform information and management know-how, so you can expect dependable results. You can also hand over the setup and the analysis entirely, so you can get ads live without committing your own resources and your own people can put their time into business as usual.
The disadvantage is the management fee, which comes on top of the advertising spend.
The usual going rate is 20% of the advertising spend.
So it is not a good choice if you do not have room in the budget for an agency.
If cost is not a problem and you want to run search advertising in earnest, commissioning an advertising agency is more likely to give you the return you want.
6.2 Use automation and reporting tools
This means running the work in-house while using technology to make it more efficient.
For report automation, for example, you use a tool such as Looker Studio to automate the daily collation of figures and the charts,
and for bid optimisation you use a tool such as Shirofune to let AI adjust budgets and suggest improvements.
The advantage is that it cuts out routine work such as producing reports, freeing time for strategy and creative improvement.
That said, tools only assist the work. Choosing the final audience and writing ad copy that sells still need human judgement.
If you are already running several accounts in-house and want to be more efficient, automation and reporting tools are a good approach.
Different automation tools can do different things, though, so look for one that will make your work more efficient, weighing it against your own way of working and the cost.
6.3 Run it yourself (in-house)
This means your own staff working directly in the ad management screen.
With an advertising budget of 100,000 yen or less, the work involved is not that great, so running it yourself is feasible.
The advantage is that there is no fee to an outside party and the know-how builds up inside the company.
Getting results takes continuous learning and improvement, though, and starting with no experience takes a great deal of time and effort.
It helps to have some knowledge of advertising already; learning from scratch takes considerable time and effort.
With this approach there is a risk of wasted advertising spend through setup mistakes or insufficient analysis, so it is wise to have people inside and outside the company you can turn to.
See NowVillage’s support for leaving your agency and bringing marketing in-house
7. Frequently asked questions about search advertising (FAQ)
7.1 Q. Should we prioritise search advertising or SEO?
A. If your aim is immediacy, search advertising suits; if it is building an asset that attracts customers over the medium to long term, SEO.
Search advertising can put you at the top of the page as soon as it is set up, but it costs money.
SEO, on the other hand, costs nothing per click, but takes several months or more of time and effort before it delivers. If the budget allows, using both to increase your share of the results page is the most effective course.
7.2 Q. What is the minimum we can start with?
A. In theory from one yen, but in practice we recommend starting at around 100,000 to 300,000 yen a month.
If the budget is too small, the AI lacks the data it needs to optimise results, so performance suffers. On platforms such as Google Ads you can run ads with prepayments from as little as 1,000 yen.
7.3 Q. Is it better to use an agency or to run ads in-house?
A. If you are aiming for serious revenue growth, an agency is the option; if you want to keep costs to a minimum, running it yourself is.
・An agency: brings the latest know-how and cuts your own workload, but charges a fee of around 20% of your ad spend.
・Running it yourself: there is no fee, but acquiring the expertise takes a great deal of time and learning cost.
One approach is to leave the start to professionals and bring it in-house once things are running, so do get in touch with NowVillage.
7.4 Q. What kinds of products suit search advertising?
A. Products where search demand already exists, and products with a large gross margin.
・Good fits: urgent services (lockouts, plumbing repairs), B2B tools that buyers actively compare, high-priced consulting and so on.
・Poor fits: products built on concepts so new that nobody searches for them, or low-priced disposable goods where the cost per click eats into the margin.
7.5 Q. What should I do when my ads run but get no clicks?
A. The cause usually lies in the targeting (keywords) or in the ad copy.
・Review your keywords: check whether the intent behind the search and the content of the ad have drifted apart.
・Improve the ad copy: spell out the benefit to the user in concrete terms and work on lifting the click rate.
・Make use of assets: filling out ad assets such as phone numbers and sitelinks to take up more space on the screen also works well.
6. In closing
We have covered the basics of search advertising, from how it works to what it offers.
Search advertising reaches prospects with high purchase intent directly and can be started on a relatively small budget, which makes it a very cost-effective approach.
Set the spend you can accept and decide whether to use an agency, choosing the approach that fits your own scale and goals.
SupervisorReviewed by
HIROKI TAKAYAMADirector and CGO, NowVillage Inc.
Has worked on marketing for more than 500 companies, from HubSpot implementation and operations through to SEO and AEO strategy.
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