Google has always said that paid search and free listings are separate from each other, and what you do on one has no bearing on the other. That may have changed, as we explain.
As part of Google’s obsession with search quality, Google does not allow ads from sites that do not meet its “editorial guidelines”. In the past, that meant that your ads needed to look and sound normal, and not have spammy content or overhyped marketing pitches.
Now, Google includes your site in their consideration of an advertiseer’s quality. If a site is considered to have spammy content or is not well structured from an SEO standpoint, they will punish the advertiser by requiring a super high minimum bid, which is otherwise referred to as a “Google Slap”. This way, they ensure that searchers have a “quality experience” both while looking through the ads while on Google, as well as when they click on an ad and go to the advertiser’s site.
Therefore, its not just a good idea to invest in SEO for the free traffic, but also for pay per click. A well optimized site with good title tags, anchor text, and sitemaps will pay off in having lower bid prices, better positions, and more exposure.