Contextual advertising, also known as content targeted advertising, places relevant keyword-targeted ads on content pages to help advertisers extend their reach and target their audience profitably. Contextual advertising is used mostly for content-based websites. With contextual advertising a program or system automatically scans a webpage’s content for specific keywords or search strings and based on the results then returns targeted ads based on the page’s content. Contextual advertising is very beneficial for all kinds of content-based sites like news and publisher sites as well as sites of small businesses and even personal blogs. However for your website to maximize your profit from the contextual ads on your site your site’s content should be of good quality, meaning that it should be rich, relevant, and updated on a regular basis. A site with poor content and that uses contextual ads would most likely point its target audience to another site that is of better quality.

Publishers benefit from a new revenue stream, accessing thousands of advertisers they may have not otherwise had access to. The high degree of the ad’s content relevancy delivers a higher click-through rate than traditional online advertising, so better profit for publishers.

Search engines benefit as contextual ads have been a significant revenue generator. Contextual ads allow search engines to monetize something like 85% of pages on the internet.

Advertisers benefit from the additional sources of traffic and the ads run on the same web page as related subject matter. So there is a guarantee that the audience is interested in that kind of product or service. Advertisers are especially interested in using contextual advertising since it delivers targeted ads to a more receptive target audience.

For users, contextual advertising, improves the experience of navigation, by displaying useful ads, related to the subjects the user is interested in. For example, if you are visiting a Web page iPod reviews, the ads displayed on that particular Web page are related to iPod. 

There are three different types of contextual ads: separate ads that appear in specific areas on a page, inline or in-text contextual ads, or pop-up ads. Some recognizable contextual advertisers are Google’s Adsense and YPN. Inline contextual advertisers who are willing to pay top dollar for Pay Per Click (PPC) advertising can have their ad placed at the top of the “sponsored listings” section of a search results page. In-text contextual advertisers, advertisements appear in the actual body text of a page and allow users to view the ad if they choose to click on the link.