Contextual advertising. Basics: work algorithm, types, features

on Sep 2020

What is contextual advertising?

Contextual advertising is a form of personalized advertising that allows you to show users the most relevant ads according to their search queries, interests, socio-demographic data or online behavior.

What tasks does contextual advertising solve?

For business:

Increase in targeted traffic and sales.
Launching a new product on the market.
Formation of the brand image on the Internet.
Carrying out promotions.
Retention of existing customers.

For users:

Selection of offers that match the request
Informing about assortment, campaigns
Comparison of product offers from different online stores

How do advertisers pay?

In contextual advertising, payments are made according to the PPC (Pay-per-click) format, that is, the advertiser pays only for those users who have visited the site.

How does the system determine which ads to show? Every time a user searches on the Internet, goes to the affiliate site of an advertising service, opens a video, the system conducts an auction in real time, which takes a split second. All relevant ads with their advertiser-set bids participate in it.

But a high bid does not guarantee that your ad will show up. The system takes into account many metrics, including ad quality, landing page quality, and CTR (Click-through rate, defined as the ratio of the number of ad clicks to the number of impressions). The advertising system shows ads from the side of the benefit to itself. The higher the click-through rate and the bid, the more likely the system will make more profit from showing that ad. Also, this algorithm allows you to alternate ads from different advertisers and show users the most relevant and high-quality ads.

Advantages and disadvantages of contextual advertising

Despite the fact that contextual advertising is a very common tool for promoting a business on the Internet, it has both advantages and disadvantages.

Let’s start with the pros:

Works immediately after launch. Users see your ad right after you launch it. This allows you to quickly attract the target audience to the site and get results instantly.
Complete cost control. You can distribute the budget according to priority areas, set bids at the level of campaigns and keywords, control CPC (Cost-per-click – the amount that the advertiser pays the advertising system when the user clicks on the ad).
Attracting only targeted traffic to the site. Contextual advertising allows you to attract only interested users to the site: targeting relevant keywords, specific audiences of interest, or creating your own custom audience.
The ability to decide whom and where to display ads. You can set up ads for users who belong to a specific socio-demographic group, and are in targeted locations on sites related to your business.
Pay per click, not per impression. You pay only if a user sees your ad, clicks on it and goes to the site. This makes budget spending more efficient.
Ability to work with non-optimized sites. You can bring users with the help of contextual advertising to any page, one-page sites, even if they are not indexed.
Detailed analytics. PPC services allow you to clearly track the performance of individual campaigns, keywords, ads, locations and audiences.

Now let’s talk about the cons:

Price. Contextual advertising is one of the most expensive channels for attracting customers.
High competition. A lot of advertisers are constantly participating in contextual advertising auctions. You will have to constantly work on the quality of your ads and increase your bids in order for your ad to appear above your competitors.
Difficulty of setting for inexperienced advertisers. Effective use of the budget requires experience in setting up advertising campaigns.
You must comply with the advertising services policy. There are restrictions for certain areas of business: medical topics, alcohol, gambling, etc.
Not suitable for everyone. If you are a small local business, PPC advertising can be ineffective and too expensive.

Types of contextual advertising

Search engine ads. Search engine ads appear immediately below the search bar. Users see such ads at the moment when they are most interested in a product or service. Ads consist of a title, description, site link, and extensions.

Targeting: keywords.

2. Display ads. Displayed on sites and mobile applications that are partners of contextual advertising services. Such ads are seen by users who have already shown interest in your or a similar product, or are on a website that is related to your business. Display ads can be text, image, or both.

Targeting: audience, thematic.

3. Video ads. Advertising videos are shown on sites and applications that are part of the affiliate network of ad systems, as well as on YouTube. There are different formats of video ads: they differ in placement, video duration and payment methods.

Targeting: audience, thematic.

5. Shopping ads. This type of advertising is suitable for online stores, is shown in search engines above organic results, and on partner sites of advertising services. Trade ads consist of a product image, name, price, and store website. These campaigns use pay per click. Shopping ads, when compared to search ads, are more engaging and have a higher CTR.

Application ads. A special type of contextual advertising designed to promote mobile applications. These ads can be displayed on search engines, on resources that are part of an ad system affiliate network, and in app markets.

Targeting: automatic. Payment: for impressions, installations, targeted actions within the application.

Types of targeting

Thematic targeting. Advertising is shown on resources of a specific topic related to the advertised product.
Interest targeting. Ads are shown to users with specific interests.
Geographic targeting. Ads are shown in a specific geographic region.
Local targeting. Advertising is aimed at users who are within a radius of several meters or kilometers from the selected geo point.
Time-based targeting. Ads are shown at specific times of the day, week, month, year.
Socio-demographic targeting. Ads are shown to users of a certain age, gender, position, and a certain income.
Behavioral targeting. This type of targeting allows you to show ads to your audience based on their online behavior. User data is stored in cookies.
Geobehavioral targeting. Advertising systems track the routes, places, stops of users, and, on the basis of this, form an understanding of the habits and interests of users.

Keyword match types

Broad match type. This type of match is standard, designed to reach the widest possible audience of users. Advertisements will be shown if the search query contains any words associated with the keyword: words in different word forms, synonyms, misspelled words, with different word order.

Features:

used for narrow niches;
there is a possibility of being shown for irrelevant requests;
low CTR.

Broad match modifier. It is also intended for a wide coverage of the audience, but in this case, you can mark with the “+” parameter the words that must be contained in the search query. Advertisements will be shown if the search query contains close variants of keywords, word forms, but not synonyms.

Phrase matching. This type of match allows you to narrow your audience reach and fix the word order in the search query. Advertisements will be shown if the search query contains a keyword in the specified word order. The passphrase is enclosed by the “” parameter.

Exact match. This kind of match is the most limiting of audience reach. Advertisements will be shown if the search term matches the keyword exactly. The passphrase is enclosed by the [] parameter.

Conclusion

Contextual advertising has become a powerful tool for promoting business on the Internet. It has a number of undeniable advantages, such as a quick start, attracting the target audience to the site and analyzing the return on investment, and also helps to solve many problems. This type of promotion is suitable for most niches and allows you to work with any budget.