Most of the times these two terms are used interchangeably but there is a difference between the two. SEM is a broad term while SEO is a subset of SEM or can be called as a component of SEM. SEM is actually an act of optimizing a website for organic or natural search engine listings while SEO is the most cost effective component of SEM
Example:
An SEO for a keyword like SEO London would include its page ranking to be improved in the organic search of Google while SEM would include running marketing campaigns for both organic and as well as paid.
Components of SEO
An SEO consist of the following
Keyword Research: choosing the appropriate keyword to improve the ranking of your page
Directory submission: Back linking for a website
Blog writing & posting: Informal content writing containing inbound links to other sites with in anchor text which also includes graphics, audio and video.
Article writing & positing: Formal content writing containing inbound links to other sites with in anchor text.
Social bench marking: Back linking on a public website such as Digg, Del.icio.us etc.
Social book marking: Promoting the web site on social networking sites such as Face book, twitter etc.
Components of SEM
While SEM consist of all of the above and additionally
Paid inclusion: It’s a practice of paying a search engine to add a site to its database immediately rather than setting up the site so that the search engine spider would find it on its own
Traditional ads this includes placing paid ads on search engine result pages
Pay per Click (PPC) advertising: it’s completely text only in which user defines which keyword should be brought up by the ad.
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