Contextual-based advertising is when an ad is placed on a Web page, in real time, based on the specific content of that individual Web page. For example, a publisher may have a sports site and traditionally sells this placement option with the same ad displayed on all pages of the site. With contextual-based advertising, an ad for tennis shoes would appear on pages about tennis events, while an ad for golf clubs would appear on a page about golf events. And with news sites, it becomes even more powerful due the wide range of ever changing stories and topics covered by each page of the site.
Contexual-based advertising has been around since 1998 when Overture introduced it with their Content Match program, however it is Google's AdSense program that has made a real impact in the online advertising industry. The Google AdSense program also places ads not only based on context but also on popularity of the ad (click-through rate (CTR)). This means that publishers maximize the return from their inventory by eliminating ads that perform badly and only presenting ads that are relevant to the content and popular with visitors. Advertisers are charged on a cost per click basis.
Contextual-based advertising is expected to grow rapidly as more publishers and advertisers adopt this performance based advertising option over traditional banners. Those in the industry advocate cost per click because the price is low and conversions are high.
Performance based advertising
Text and image ads supported
Placement is automated and more relevant to users than run-of-site wide placement
Ads are placed on a wide range of sites not just search engines
Cost effective for international banner and text ad campaigns
Ads are only displayed if relevant and popular, limiting branding opportunities
Still in its early days, some inventory is limited