What Is Contextual Advertising and How Does it Work in Today’s Digital World

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It seems the ad tech[11] and digital marketing worlds have returned to the art of contextual advertising—which is, in fact, a nice solution for advertisers who are concerned with data privacy law compliance.

Unlike behavioral targeting[12][1], contextual advertising doesn’t depend on third-party cookies to collect users’ personal information to deliver relevant ad experiences. It also comes with several other benefits.

So, what exactly is contextual advertising and why has it made a comeback?

Keep reading to learn more. 

What Exactly Is Contextual Advertising?

Contextual advertising refers to a specific type of targeted advertising[5] in which the keywords and content of a webpage are used to determine display ad type and placement versus using user behavior. In other words, ad placement is determined by the actual content of each web page instead of the consumer data regarding a users’ online behavior. 

The entire contextual advertising process is based on contextual targeting[2] on ad networks, which takes into consideration segmented ads that are typically based on certain parameters, such as the website’s theme or topic and relevant keywords.

Here’s a quick example:

Let’s say a user is reading a blog article about iPhones. In this case, there might be ads on the web page related to iPhone accessories, apps, and other Apple products. Whatever is displayed would be based on the topic the user is focusing on at the time rather than where the user was before visiting the web page—i.e., his or her prior searches.

Essentially, contextual advertising—via contextual targeting—is what enables publishers to create a stronger marketing strategy that’s based on relevance rather than traditional user data[13]. Relevance is the operative word here, as matching the user’s intent is what delivers an overall better experience. 

How Does Contextual Advertising Work?

Generally speaking, there are two ways that contextual advertising can be implemented. The first is by relevant content keyword and the second is by content topic. 

When using a relevant keyword, the ads are displayed as close as possible around said keyword or the main keywords/phrases. When using content topics, the ads are displayed throughout the webpage but remain relevant to the topic at hand as mentioned in the example above.  

One of the first major contextual advertising networks was, of course, Google AdSense. Google AdSense[6] still works using the same two methods where the network allows Google’s data bots to determine the relevancy of a web page’s content. From there, the contextual ads are displayed on the publisher[14]’s web pages accordingly.

Google AdSense also works by analyzing the text of an image to display the contextually relevant ads above the image ad.  

In terms of programmatic advertising[3], the publisher is responsible for gathering contextual information. This would include URLs, keywords, content, categories, and even tags. Once the appropriate information is gathered, he or she would send it to the ad server. From there, the ad server passes the information on to the ad networks, ad exchanges, or SSPs which would then pass it over to the DSP[4] to return the contextually relevant ads.

In regards to header bidding[7], the publisher would take the contextual information mentioned above and pass it onto a wrapper[8] programmed to send it over to the SSPs or ad exchanges through ad requests. Moving forward, the SSPs or ad exchange[9] would also pass on the information within their bid requests as critical parameters for their respective DSPs to return.

It should be noted that if you’re working with Google Ad Manager as an ad server, you can implement contextual advertising using key-value targeting

The Benefits of Contextual Advertising

Contextual advertising has been on the rise for good reason. Not only does it benefit publishers but advertisers as well, and it’s mainly because it doesn’t depend on users’ personal data which easily results in miss-targeting altogether.  

Let’s take a quick look at the benefits of contextual advertising all around in accordance with a 2020 report by GumGum:

  • The brand memorability of high contextually relevant ads is 1.6 times higher compared to that of low contextually relevant ads
  • Ads with higher contextual relevance are 10% more engaging compared to the actual content of the article in question
  • For buyers, contextually relevant ads from brands saw a much higher purchasing intent—which means that users not only viewed the ads as pleasant but were intrigued to look into the products or services further

Ultimately, by targeting users based on their current search and digital position, brands, advertisers, and publishers can increase their engagement rates while remaining compliant with data privacy laws.

Contextual Advertising Vs. Behavioral Advertising: Which Is Better?

More often than not, contextual advertising gets conflated with behavioral advertising. The main things that set them apart—and should be kept in mind by publishers—are the following:

  • Contextual advertising is 100% about the environment in which the user is browsing, exploring, or shopping
  • Contextual advertising has everything to do with the relevancy of the content, keywords, topics, and images on the page
  • Behavioral advertising focuses on user data, which means that it tracks the actions and preferences of a web page’s visitors
  • Behavioral advertising also focuses on a user’s past behaviors rather than what’s going on in their current digital environment

Here’s a quick example of how behavioral advertising works since we haven’t yet defined it:

Let’s say a user has just finished reading an article about sunscreen and SPF levels. Now they’ve moved onto a website that talks about DIY bathroom tiling. The ads being displayed on the current webpage they’re on are still related to sunscreen products and have nothing to do with construction or DIY home repairs.

This is because current data is being collected as they read the new website while the data used to deliver the ads on the new web page are from the user’s past action.

When you compare the two methods side by side, it would seem like behavioral advertising is an improvement on contextual advertising. After all, why would an advertiser[10] want to match their ads with the content on a web page? (The simple answer here is that it delivers more granular and accurate audience targeting).

The truth is, they both have their strengths and weaknesses. The real advantage to implementing a contextual advertising strategy is that it allows you to forgo independent third parties and data privacy laws.

However, it’s a good idea to test out both as part of your overall marketing strategy.

Terms
1. behavioral targeting. Uses data from visitor browsing habits such as search terms, sites visited or purchases to display relevant ads and offers
2. contextual targeting. Places ads based on content on screen or on the webpage. Advertisers can use contextual advertising to target consumers based on the environment of content they are in, for example, this could be ads for running shoes on a news article about running, or it could be ads for laptops on a tech ecommerce site.
3. programmatic advertising. Programmatic advertising entails using machine learning and technology suites to buy and sell ad inventory with a data-driven process.
4. Demand-Side Platform [DSP] ( DSP ) A Demand Side Platform or DSP is a platform where advertisers can buy digital inventory to easily and more directly connect with sellers in a programmatic and real-time ecosystem.
5. Ad Targeting ( targeted advertising ) The practice of serving an ad to the appropriate audience based on data. Ad targeting can involve demographic, geographical, behavioral or psychographic data.

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