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Contextual Advertising 101: How To Reach Your Audience With Relevant Ads

Contextual advertising is an adtech approach that helps brands reach new customers and target audiences more naturally with relevant content. It’s a powerful addition to your company’s marketing strategy, though as with many advertising solutions there’s a lot going on behind the scenes to make the magic happen.

Below, we’ll show you what contextual advertising is and how it’s different from behavioral targeting. We’ll walk through common types of contextual targeting and the benefits you stand to gain by adopting this system. We’ll finish with some practical steps for getting started with contextual advertising.

What is contextual advertising?

Contextual advertising is a digital marketing technique that takes a modern approach to ad targeting, serving up ads based on the context in which the ads will be shown. It’s a rapidly growing market that one industry think tank projects will reach $562.1 billion by the year 2030. Contextual advertising is less invasive than behavioral targeting (more on that below) and leverages factors that include:

  • The site or type of content on the site where the ad appears
  • The location of the viewer (using geolocation data)
  • The weather in that location

Contextual advertising could, for example, show ads for baseball cleats on a webpage full of content about improving a particular baseball skill, but show ads for MLB.tv when the content is about how a particular professional team performed last night.

For a while, contextual advertising fell out of favor due to the inability to understand the content of the page (airline ads appearing next to stories about airline crashes). To avoid brand safe placements, the industry moved to behavioral targeting. However, over the past 10 years, two important developments emerged:

  1. The consumer rebelled against the kind of tracking that is part and parcel of behavioral targeting. The regulators stepped in, introducing privacy laws to curb it.
  2. Various forms of AI now allow us to understand the sentiment of an article (e.g., distinguish between a story about flying off to romantic getaways and one about plane crash). Computer vision allows us to assess images. As a result, we are much better at assessing context for targeting purposes.

By using contextual clues fed into machine learning, contextual advertising systems can “see” the difference in audience: The first reader is much more likely to be an active player who might need to purchase cleats, while the second reader is much more likely to be a fan who might pay for Major League Baseball’s premium streaming service.

Contextual advertising vs. behavioral targeting

Contextual advertising is based on the context of an impression and some user properties — the type of device the ad is seen on, for instance. Contextual targeting is inherently privacy compliant because the consumer’s behavior isn’t tracked. 

Behavioral targeting looks at what the individual reader has been doing: if the user has been searching for baseball cleats and is then inundated with ads for baseball-related products on social media, that’s retargeting based on past behavior. Another example is when a user visits your website and then seems to see your advertisements all over the internet for a few days.

In general, behavioral targeting looks at what an individual user has been doing, using cookies to track their activity across the web. The results can be effective, but they can also be downright creepy — and they sometimes run afoul of privacy regulations.

Contextual advertising doesn’t look at the behavior of the individual user, but at the content and context of the destination. It’s an intelligent way to serve up ads that provide many of the same benefits as targeted behavioral advertising, but without the privacy concerns or potential for inaccuracies. For example, behavioral targeting may assume that because someone is visiting a parenting site, they must be female identifying and between the ages of 25 and 45. However, it doesn’t account for the fact that the person could just be visiting the site to order a gift for someone else.

Types of contextual advertising

Contextual advertising uses a range of context factors to determine what the ad should be about. But what do these ads look like?

It depends on the medium or type.

For example, consider a car ad shown in February. You can use the location context to customize an ad creative so it resonates with a reader. If the viewer is in Michigan, the car will have snow tires and be pictured driving over snowy terrain. But if the viewer is in Florida, the car may have the top down with a surfboard sticking out of the trunk. 

Most of the typical internet ad formats can support contextual advertising. Here’s how it looks across four common digital advertising methods.

Text-based contextual advertising

Text-based ads are ads that rely on words alone (or nearly so) to get the message across. These include:

  • Paid search ads (the listed results are text-dependent)
  • Google Ads (dynamic, auto-formatted text ads that appear across the web)
  • Ad-oriented chatbots

Each of these ad formats can work in contextual advertising settings.

Image-based contextual advertising

Image-based banner ads are arguably the most familiar ad format online, and these are a very popular choice for contextual advertising. The sorts of pages that most naturally support banner ads (blog posts, articles, etc.) offer up a trove of contextual information — and there has been a lot of tech development to ensure brand safety.

For example, an article on the best fiction books of 2023 is a great place for contextual ads on e-readers, reading glasses, reading lights, and so on.

Video contextual advertising

The ads populating YouTube are very often contextual: they have something to do with the video topic rather than whatever you were searching for online yesterday.

In-game contextual advertising

Video games that serve up ads can also use contextual advertising. For example, if you play a Sudoku or solitaire game that has ads, you probably get ads for other puzzle and card games. And if you play it on your iPhone, chances are those ads will be for iPhone apps available on the Apple App Store (not Android or PC exclusives).

Benefits of contextual advertising

So why are businesses gravitating toward contextual advertising over other approaches? Because contextual advertising gets results.

Consider these five powerful benefits businesses that advertise online can enjoy when they use contextual advertising strategies.

Better user privacy

First, contextual advertising doesn’t require cookies or personal information to be effective, so it’s capable of delivering a better user privacy experience.

This is a benefit in the abstract, but it has real-world implications as well: With GDPR classifying the data contained in cookies (a requirement for behavioral advertising) as personal information, managing user data is more complex than it used to be, and significant fines aren’t unheard of for businesses that get it wrong.

Improved targeting

Contextual ads are almost always relevant: The sites you might visit to learn how to fix a television are perfect destinations for big-screen TV ads. And once you’re done with your repair, you’re done seeing TV-related ads.

That’s the consumer perspective, but the business side isn’t that hard to work out: better targeting means better results.

Increased engagement rates

Some percentage of behavioral targeting ads are 100% irrelevant. Irrelevance occurs when:

  • The person has already bought the item in question
  • The behavior being targeted wasn’t actually related to a user’s needs (the ads from your work search history rarely lead to purchases at home)
  • An otherwise-relevant ad shows up in a jarring location (even though I use CRM software and enjoy playing solitaire, I’m not likely to buy CRM software while playing Solitaire on my phone, nor am I likely to buy Solitaire Ultra Deluxe while using a CRM)

Simply put, contextual ads don’t have this problem nearly as often because they relate to the context of the page where they appear, they nearly always make sense.

It doesn’t exactly take a panel of experts to conclude that ads that make sense to the user’s context at a moment in time get more engagement than ads that don’t. But as it happens, the experts (and their research) agree: One detailed study found 43% more neural engagement with contextually relevant ads. Not only that, people were more than twice as likely to remember the content of the ad!

Enhanced user experience

Not only is contextual advertising a privacy win in terms of compliance with ever-evolving privacy regulations, but it also offers a better user experience. Despite how effective behavioral targeting can be, a significant slice of end users do not like it — and people are becoming more aware of it.

Startpage found that 42% of American users felt uncomfortable when they noticed receiving ads targeting specific behavior or traits.

In contrast, contextual advertising simply places ads relevant to the content the user is viewing. These ads are often just as relevant, and (as we noted above) people tend to accept them more easily because they make logical sense where they are. A smoother, less jarring user experience free of friction and dissonance is simply better for users. 

How to get started in contextual advertising

We’ve described how contextual advertising works in relatively simple terms because the concepts themselves are pretty simple. Any human could easily look at an article or page, determine what it’s about, and assign contextually relevant ads.

But humans aren’t doing this work manually (imagine the scale or sheer number of workers that would take!). Instead, digital systems must evaluate website content (and other factors) in real-time. So while understanding contextual advertising is pretty simple, actually executing it is a bit more complex.

Here’s how it works.

Contextual advertising relies on  several types of contextual signals that will have a direct impact on the user experience. These signals can include content and images to see if they are relevant to a brand and meet their brand safety standards. 

Importantly, it can also include IP address intelligence data — which can give us very useful information like the user’s location, device type and connection speed. The systems that make this happen are algorithm-driven and AI-infused, and they rely on techniques to refine this work and approach human-like levels of decision-making (only much, much faster).

It’s not the sort of thing that usually happens in-house.

Most businesses getting started in contextual advertising will rely on a partner that focuses on this discipline. The business needs to develop the ad campaigns and the associated landing pages (for best results, those personalized ads need to land on equally personalized landing pages), but usually the third-party ad partner handles the contextual placement.

Establish an effective contextual advertising strategy with Digital Element

Contextual advertising makes sense for just about any brand or business that devotes some of its marketing budget to online advertising. Using geo-location data can help brands create more personalized ads based on non-invasive information like weather or local language.

But building an effective contextual advertising strategy comes with upfront technical questions, including a big one: Where will you get the data to inform your contextual decisions?

Digital Element is the leading provider of geolocation and ad targeting data, giving you key data insights about your audience that can fuel both your contextual advertising strategy and your broader marketing analytics.

Learn more how Digital Element can help you understand your audience better and benefit your contextual advertising campaigns.

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