Contextual advertising does something that no print advertising could ever do—at least not yet. Ever see the movie "Minority Report"?
The main character is walking through a busy section of a city and the billboards speak directly to the character based on his personal profile. It will be a strange time when this is done in the non-cyberspace world. Currently, contextual advertising is one of the hottest marketing avenues online.
The concept of web-based contextual advertising is the same as the movie: when a person browses onto a web page, the advertising changes according to that user. One of the more common contextual advertising options is keyword-based marketing. When a person types in a specific keyword in a search engine and lands on a page, the ads on the page will reflect items for that keyword. This form of advertising has proven to be effective over more generic ads, as it targets each web surfer individually.
Contextual advertising is also useful for affiliate marketers. A second popular model can be found via Amazon Associates links. The Amazon links reflect the browser's past shopping history with Amazon. Another common one is Google Adsense, which changes according to the content on the page. So, for example, a blog entry about baseball will create Adsense links leading to baseball products.
Keep in mind that some types of contextual advertising are controversial and so are not widely used. Spyware-based applications can be put on user's computers, which will then monitor a web surfer's Internet and purchase history. Advertising, sometimes in the form of pop-ups, reflect the user's history. It is unsurprising that this form of contextual advertising does not have a lot of advocates. However, keyword-based pop-ups are not nearly as intrusive as spyware and so they are another contextual advertising option—though pop-up blockers are making these less viable.
The last contextual advertising option involves text-based links. These links will occur within the content on a site, but without necessarily relating directly to that content. So, for example, an article about affiliate marketing may have the words "web design" highlighted by a link, which leads to a web designer.
The contextual advertising system is good for both website owners and advertisers. It can be seen as a similar form of advertising as pay-per-click advertising, yet expanding the reach well beyond search engines. Instead of bidding on keywords in search engines, advertisers can bid on keywords on websites—they bid on having their link show up if a keyword is entered or a specific page displayed.
This is good news for website owners as well because they can get advertising revenue from a wider variety of sources. A static ad on a site is shorter-lived and can only advertise one product at a time. The system can be done either by pay-per-impress (whenever the ad is viewed) or pay-per-click (whenever it's clicked). Most often, it's the latter. Web owners shouldn't stop with Google Adsense. There are new players on the scene: most visibly the Yahoo Publisher Network and MSN Adcenter. Smaller advertisers are also employing contextual advertising. This is good news for people trying to generate out-clicks on their sites or site owners who want to advertise on a wider range of sites.