A method of serving advertisements based on the content (i.e., overall context or theme) of a web page.
In the early days of online advertising, ads served on web pages were placed on a first-come, first-served basis. That is, the first advertiser chooses where and when his ads will be displayed with little regard to what’s the actual content of the page where his ads will be shown. This system is very similar, if not identical, to how newspaper advertisements work. Then Google came.
Google AdSense was the first advertisement service that introduced the inclusion of a page’s overall context in determining which type of ad campaigns will be rolled out for that page. For example, if a web surfer goes to a page about laptops, then Google AdSense may also serve advertisements about laptops or other related electronic equipment. Because the ads are relatively more relevant to what the user is interested in, then it is hoped that the ad’s click rate will drastically improve.
However, there are times when contextual advertising do not work effectively. Some software programs used by ad services are still incapable of “reading between the lines”. That is, content that contains irony or sarcasm are difficult to detect, forcing the contextual advertising system to serve potentially offending ads. For example, an ad for life or health insurance may be served on an obituary page, or a low-fat animal-derived food product may be served on a page about vegetarianism.
see also: Digital Marketing Tools
Contextual Advertising in Context, Part 1
ClickZ (March 19, 2003)