What is Contextual Advertising? How it works and its benefits explained

Read time: 8 minutes

Digital advertising is undergoing a major pivot.

The end of third-party cookies marks the end of an era in which knowing as much personal information about an intended audience was the main determinant of an ad’s effectiveness.

While first-party data strategies remain effective for targeting individuals that interact directly with brands, engaging unknown audiences in a meaningful way has become challenging.

One solution gaining the attention of the industry is contextual advertising – an effective way of having the right audience come to the ads, instead of the other way around.

In this guide, we’ll explore the advantages of contextual advertising, and how it differs from traditional ad targeting methods that rely on third-party data, such as behavioral advertising.

Table of Contents

What is contextual advertising?

Contextual advertising is a targeted advertising method in which ads that share a common theme with certain content online are served to the audiences that engage with that content.

This creates a high level of audience engagement by creating a link between the contents of an ad and the contents of the online media a user is interacting with when the ad is served.

For example, it’s likely that a user who’s reading a blog about car insurance rates will be highly receptive to an ad that offers a discounted car insurance promotion.

Similarly, an ad for the latest Marvel or DC movie is likely to resonate highly with users who are about to watch a video on YouTube that takes a deep-dive into the history of their favorite superhero.

Contextual Advertising vs Behavioral Advertising: What’s the difference?

Contextual and behavioral advertising are often confused with one another.

The difference between contextual and behavioral advertising is that contextual ads are targeted to match the contents of a page, while behavioral ads are targeted at users who have exhibited specific browsing habits.

Contextual advertising is focused on creating an alignment between the content found on a page and the advertisement being served to that page.

Behavioral advertising is focused on creating an alignment between the historical actions a user has taken online and the actions they’re likely to take next based on their behavior.

Behavioral ads can be served on any website – because the behavior of the user is identifiable through the information shared by their web browser to a publisher’s ad server.

In contrast, contextual ads are only served to websites and media content which match the theme of the ad being served – which is determined through the use of keyword matching.

How does contextual advertising work?

Contextual advertising is a technique which involves a publisher and an advertiser working together to deliver an ad creative to a publisher’s contextually relevant website.

How publishers configure contextual advertising

In order for contextual advertising to work, a publisher must first ensure that the content on their website is tagged with topical categories and keywords that identify what the contextual focus of each page is.

For example, an automotive publisher might have broad categories assigned to topics like “car insurance”, “car repairs”, and “car reviews”.

The same publisher might also include keywords for each article or blog post to help further define the subtopics of each page.

These might include specific makes and models of cars like “Honda”, “2021 Civic”, features such as “Manual Transmission” or “Automatic Transmission”, or engine types like “Combustion”, “Hybrid”, or “Electric”.

These categories and keywords allow advertisers to match their ads to the tagged content in the next step of the contextual advertising process.

How advertisers configure contextual advertising

Advertisers use a system called a DSP (demand-side platform) to define their list of requirements for serving a contextual ad.

While every DSP is slightly different, the option to select from a list of broad categories as well as niche topics is generally available on all systems.

To stick with the automotive example, a repair service might run a seasonal ad that targets the niche keyword “tires” to advertise a promotion for winter tire swaps near the end of fall.

A repair and restoration shop for vintage car models might run an ad that specifically targets a car’s model, “Porsche 911 Carrera”, together with the model’s year, “1987”.

In yet another example, a car dealership interested in selling a wide range of cars might target a variety of car makers, including “Honda”, “Dodge”, “Ford”, “BMW”, and “Mazda”.

Contextual ad placement in action

Once both the publisher and the advertiser have defined the keywords they’d like to match, the process of serving a contextual ad can begin.

An advertiser will upload their ad creative and select the keywords they’d like to target through their DSP.

When the ad campaign is launched, any publishers that own content tagged with the matching keywords will be a viable supply source that the advertiser’s ad can display on.

Modern contextual advertising can also make use of a publisher’s first-party data to evaluate an ad’s product affinity score, which creates better alignment between specific types of ads and a webpage’s content.

The process of serving an ad is then followed – a technical process which is covered in the linked guide if you’re interested in learning more about it.

The end result of this process is a contextual ad being served to a piece of content that matches what the ad is about – for example, an ad for a 2022 Ford Mustang appearing on a review article for another car model manufactured by Ford.

Advantages of contextual advertising

While contextual advertising has gained significant popularity in recent years due to the shifting digital landscape, there have always been many advantages associated with it.

Privacy friendly

It comes as no surprise that most of the internet values their digital privacy in modern times.

Website notifications about legislations like the GDPR have become commonplace online – a tricky and necessary legal obstacle for publishers and advertisers to navigate in many cases.

One of the great things about contextual advertising is its ability to bypass the need to rely on a user’s compliance with all such privacy regulations.

Because contextual advertising only relies on keyword matching between a publisher’s content and an advertiser’s targeting preferences, the technique allows end-users to maintain their privacy throughout the ad serving process.

Ease of implementation

While many advertising techniques rely on access to detailed sets of data to accurately target a given audience, contextual advertising operates on straightforward keyword matching – creating a simple and effective targeting system.

Because tools like DMPs (data management platforms) aren’t required for contextual advertising, the barriers of entry (including cost) to using this approach are much lower than other advertising methods.

Improved Brand Safety

Contextual advertising provides a much higher degree of brand safety than most other forms of online advertising.

Part of maintaining a brand’s public image comes from serving ads to high-quality websites, an objective which isn’t always feasible when website selection is managed solely through a user’s data and browsing habits.

Because contextual advertising manages website selection for ad serving based on the contents of a web page itself, the chances of a contextually relevant website complimenting the message of an ad and retaining a brand’s reputation are both greatly improved.

Ad Relevance

The psychological effect of viewing an ad which is semantically related to a page’s content has a significant impact on a user’s receptiveness to that ad.

In fact, a study conducted by BusinessWire indicated that 73% of consumers felt that contextually relevant ads complemented their content experience.

Not only that, but purchasing intent was 63% higher for audiences that were served contextually relevant ads over those which were targeted through behavioral methods.

Additionally, while techniques such as frequency capping are used to limit how often a user is exposed to the same ad through behavioral targeting, contextual ads similarly reduce ad fatigue by only displaying when relevant to a user’s browsing experience.

Contextual vs Behavioral Targeting: Which is more effective?

In the past, the common consensus among advertisers was that behavioral targeting was more effective in many ways than contextual advertising.

After all, being able to accurately target a user across all of the websites they visit had to be more effective than targeting a single website – right?

However, a series of strong arguments have always existed for the use of contextual advertising – and with the announcement of third-party cookies going the way of the dinosaur-shaped cookie, contextual has been making a comeback in the ad industry.

While methods such as device fingerprinting may still create viable use-cases for behavioral advertising in the future, most advertisers, the platforms they use, and the legislations they have to follow aren’t positioned to make full use of behavioral advertising past 2022.

For advertisers that want a surefire way to future proof their ad serving process, contextual advertising offers a tried-and-true methodology that won’t be going anywhere after third-party cookies have long since left the ad serving party.

Making Contextual Advertising Work in Your Business

Contextual advertising is an effective ad targeting technique which has often been overshadowed by targeting methods that rely on third-party data.

With the end of third-party cookies drawing closer, there’s never been a better time to consider making the jump to contextual advertising to future-proof your ad serving strategy.

The AdButler team has over two decades of experience in providing and configuring ad serving solutions for both publishers and advertisers.

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