As stricter internet regulations require a shift away from cookies to track user behavior online, contextual advertising continues to increase in popularity. Between 2022 and 2030, contextual advertising spending is predicted to grow at a rate of 13.8% annually. Let’s take a look at what contextual advertising is, how it can benefit marketers, and the best ways to execute a contextual advertising campaign.

What Is Contextual Advertising?

Contextual advertising is a type of programmatic advertising that uses the surrounding content, rather than user behavior, to determine ad placements. Contextual targeting is the process of finding the most relevant spots to place ads, while contextual advertising refers to the actual ad creative.

How Does Contextual Advertising Work?

Contextual advertising uses algorithms and automation to find the most relevant places for ads, based on content cues such as keywords, metadata, and the overall context of videos, images, social media feeds, or written editorial (or a combination of these types of content). By serving up highly relevant ads when a consumer is in the right frame of mind — i.e., consuming content related to your ads — marketers can boost conversion rates with lower ad spend.

When to Use Contextual Advertising

Contextual advertising works best when users are in the lower decision stages of the sales funnel — consideration and action — although you can deploy it any time you want to expand your reach and find new audiences. When you focus on full-funnel campaigns, you’ll find contextual advertising extremely effective at shortening the funnel. Reach users at the right time with the right content and they might make a buying decision in the moment, even if they hadn’t been considering your brand previously.

You can use contextual advertising when you want to:

• Avoid cookies to track behavior.
• Reach people while they’re thinking about your type of product or service.
• Boost conversions.
• Attract new people.

Advantages of Contextual Advertising

Protect User Privacy

Contextual advertising doesn’t rely on collecting demographic data from consumers, which means you can reach people on platforms that block cookies and other ad identifiers. It also works on non-addressable platforms like Firefox or Safari, per Amazon’s advertising library. Contextual advertising doesn’t care who your audience is, only that they are doing something related to your brand at that moment.

Reach New Audiences Who Are Ready to Buy

Contextual advertising reaches people when they’re considering companies like yours, by placing your ads amidst relevant content. Even if they’ve never heard of your specific brand previously, contextual advertising connects you with highly relevant, highly engaged consumers.

Attract Buyers Interested in Brands Like Yours

By targeting categories complementary to your brand, you can expand your reach and grow your audience. For instance, a travel accessory company, travel booking engine, or even a sporting goods company that sells snowboards might place an ad next to an article titled, “The 10 Best Suitcases for Your 2026 Winter Getaway.”

Reduce Ad Spend and Achieve Greater Results

You can boost your return on ad spend (RoAS) with contextual advertising. Rather than paying for the number of eyes on your ad, you only pay for results. This alone makes contextual advertising enticing to marketers.

Considerations When Marketing Your Product with Contextual Advertising

Artificial intelligence (AI)-driven contextual advertising can help take the guesswork out of your campaigns. But, success starts with a clear plan, relies on effective creative, and ends in measuring your results to refine the campaign.

Set Goals

Set clearly defined, measurable goals. How will you define success? Purchases? Clicks? Downloads? Opt-ins? How will you measure your results? It’s important to establish benchmarks from past campaigns, or at least have a reasonable idea of what a successful campaign will look like when it’s done.

Choose Your Targeting Parameters

AI makes it easier than ever to find the right audience for your ads, but you’ll still need to decide on the targeting parameters, e.g., keywords, categories, themes, user intent, and sentiment.

Design Appropriate and Relevant Creative

Here’s where it gets fun — and where your actions move the needle. Design relevant creative that engages your audience. Knowing your audience based on the content they consume might help. For instance, a luggage company placing an ad next to a listicle of best winter resorts would change up the creative based on whether the ad is appearing on a website for travel and leisure, budget travel, or even men’s health.

Measure Results

Keeping your KPIs from step one in mind, track your results. Avoid KPIs that aren’t tied to revenue or business growth, e.g., social media likes that don’t convert to action, and so won’t show the real value of your campaign. Conversions, including purchases or mailing list subscriptions, make a real impact. Other KPIs might include ROAS, revenue per email subscriber, and cost per acquisition.

Optimize the Campaign

If your creative and ad placements are working to deliver an acceptable ROAS, it’s time to double down. If they aren’t, consider switching up the creative and using A/B testing to find the right content. If your ads still aren’t working, consider changing your placement parameters to reach a different audience. For instance, you might shift from social media ads to programmatic advertising on top digital publisher sites.

Types of Contextual Advertising

As communication theorist Marshall McLuhan famously said, “The medium is the message.” For marketers engaged in contextual advertising today, this means that the format of your creative is as important as the content. Some audiences respond well to text, others to video, and others to dynamic graphics. Here are some formats of contextual advertising to consider.

Text-based Ads

Often used in paid search, AI-powered chatbots, and Google Ads, text-based ads work well with a simple, straightforward message. While generative AI platforms like ChatGPT, Gemini, and Perplexity don’t currently accept paid advertising, that day could come, as well. Brands that focus on generative engine optimization (GEO) garner mentions from top chat platforms. It’s only a matter of time before companies can purchase those mentions, bypassing the slower, organic route to visibility.

In-game Ads

Marketers seeking to target an audience that lives primarily on mobile devices might use in-game advertising. For instance, a skateboarding game might share ads for real skateboards or skate gear. A digital card game developer might advertise on other card games to draw players away from the competition.

Video Ads

Video ads appear on YouTube streams, social media, and at the bottom of websites where users frequently consume video-based content.

Native Advertising

Native advertising is designed to blend in with the editorial content on a site, even though it must be clearly marked as an ad.

How to Run a Contextual Advertising Campaign

Running a contextual advertising campaign depends on the platform you choose. They vary slightly in their capabilities and effectiveness, but the basics remain similar across platforms, including Google, Amazon, Realize, and others.

Choose Your Platform

Evaluate costs, ease-of-use, and capabilities for a variety of contextual advertising platforms. Some factors to consider include the number of topics, the options to advertise on different media sites or in apps, and the use of AI to discern the context of the content and target the right audiences.

Choose Segments or Topics to Target

Once you’ve signed up, choose the topics you want your audience to be engaged in or the type of articles you want them to be reading when they see your ads.

Create and Upload Your Content

Create content tailored to the audience. For instance, Gen Z dramatically prefers video content: While 69% of baby boomers said they prefer written content via email, 98% of Gen Z like video. Similarly, 91% of millennials and 78% of Gen X also prefer video content. Across the board, 89% of consumers engage with video more than other types of content, and video is the medium most likely to trigger a purchase in the US, per the study linked above.

Measure Results

Use the onboard tools to measure your results. Keep your KPIs, including conversion rates and ROAS, in mind, as you analyze the success. Advertisers and marketing agencies vary on their recommendations for how long to let an ad run: It could take days to dial in on the right audience for a social media campaign, for example. Advertising adjacent to the editorial content of major publishers could be faster, since you’re not relying exclusively on demographic data.

The Nextdoor Business blog recommends three to six months for a campaign to fulfill long-term objectives, but you’ll want to consider seasonality, holidays, and even worldwide events that might affect the sales cycle. The more you spend on a campaign upfront, the faster you’ll start to see if it’s working or not.

Optimize Your Campaign

As you find the top-performing demographics, categories, or topics, optimize your campaign for those categories. That means putting more money into the most effective types of creative targeted at the most engaged audiences, and letting it roll until you see the start of diminished returns. That’s when it’s time to switch it up again, because you’ve saturated the market.

Create Effective Landing Pages for Your Contextual Advertisements

Ideally, your contextual advertising campaign will lead to high click-through rates and, ultimately, purchases or conversions. But, just because you’ve gotten your audience to click on your ad, it doesn’t mean your job as a marketer is over.

Campaign success hinges on creating effective landing pages. Several elements must work together in your design and landing page copy: copy must address specific pain points of consumers, as people buy solutions, not products, and graphics must be relatable and scroll-stopping. Use A/B testing by changing just one element of your creative and running simultaneous ads to find the best combination of creative to boost your conversion rate.

Consistency Between the Ad and Landing Page

The transition from the ad that attracted a potential customer and the landing page that will ultimately convert them should not be jarring. It should have a similar style, colors, fonts, and messaging.

Strong Headline

Provide a clear, concise headline that shows people they’ve been directed to the right place immediately.

Clean Design

Any photos should be engaging, not distracting. Use authentic-looking photos of faces, or hands holding products, which helps to engender trust in your audience.

Compelling Call-to-Action

Finish with a compelling and clear call-to-action. Keep it simple while creating a sense of urgency with CTAs like:

• “Claim your free [product] now!”
• “Buy now for free shipping”
• “Save 20% today only”
• “Join today for free”

How to Measure the Effectiveness of Contextual Campaigns

Return on Ad Spend

How much money did you make compared to how much you spent? Return on ad spend (ROAS) is a powerful metric that shows exactly how much revenue your campaign generated. To calculate ROAS, divide the revenue generated by the cost of the ads. Unlike vanity metrics like impressions or click-through rate (which are still important in certain settings), ROAS tells you how well your campaign is doing in dollars.

Cost per Acquisition

Your cost per acquisition (CPA) is also a tangible and useful figure. It calculates how much it costs to acquire a new customer, regardless of how much that customer spends. This can be useful if the goal is a newsletter opt-in, rather than a purchase.

CPA also helps you gauge how effective the campaign is in raising the visibility of your brand. For example, it might be more valuable to gain 500 customers each spending $1, than one customer spending $500, although the ROAS would be the same in both cases, especially if you’re building loyal customers with a high lifetime value (LTV).

Click-through Rate

Click-through rate, or CTR, shows that your ad creative is resonating with your audience. While clicks may not lead to revenue, they’re a solid start.

Conversions

Conversions show how many people took the desired action, whether that’s making a purchase, filling out a form, or opting in for a newsletter. While your conversion rate may not mean as much without looking at the ad spend behind it, you can use it as one metric amongst many to evaluate the success of an ad campaign.

Impressions

The number of ad impressions reveals how many people are seeing your ad, whether or not they act on it. If the number of impressions is too low, try expanding your topics or categories to serve the ad in more places. Think, too, about content that might be adjacent to your offerings. For instance, if your brand sells non-stick baking pans, you might place ads on a recipe website that shares healthy desserts.

Brand Awareness

You can use pre- and post-campaign surveys to gauge how well your ad campaign is increasing your brand’s visibility. You can also determine brand sentiment, or what consumers think of your brand, through polls.

How Does AI Work with Contextual Advertising?

We use AI in many areas of our lives today, from helping us create shopping lists or plan a trip to creating contextual advertising campaigns. AI algorithms can work to find the best content to place ads in real time by analyzing:

• Content beyond keywords.
• Meta data.
• Themes.
• User intent.
• Contextually relevant moments in videos or placements in articles.

Key Takeaways

Contextual advertising targets audiences engaged in related content at a time when they are ready to take action. Rather than serving ads to people within a specific demographic, ad placements depend on the content surrounding the ad. By reaching bottom-of-the-funnel (BOFU) audience members, contextual advertising often leads to a higher ROAS and lower CPA.

Frequently Asked Questions (FAQs)

Contextual advertising vs. behavioral advertising: What’s the difference?

Contextual advertising places ads based on the content of a specific web page, video, or app. Behavioral advertising relies on tracking user behavior to show ads to people who have visited specific websites or taken certain actions online.

What is the future of contextual advertising?

The future of contextual advertising will rely heavily on AI for more accurate targeting, gauging the full context of the editorial rather than relying solely on keywords or metadata. By using large language models (LLMs) to determine conversion intent (CI) for consumers engaged in various content, contextual advertising can become even more effective.

Is contextual advertising better than interest-based targeting?

Contextual advertising and interest-based targeting can both be effective marketing tactics. Contextual advertising shines when marketers can’t use cookies to collect consumer data. It also tends to reach users at a point when they are ready to make a buying decision, i.e., they’re already highly engaged in content related to brands like yours. Interest-based targeting may reach the right people at the wrong time.

Does contextual targeting perform better post-cookie?

Contextual targeting is an effective marketing solution as we move toward a cookieless internet. In the absence of user data, contextual advertising serves up highly relevant ads at the right time to people who are interested in what your brand has to offer.

What are the best AI tools for contextual advertising?

Performance advertising platform Realize is designed to boost ROAS, conversions, and CTRs by using sophisticated AI technology to determine context beyond keywords and find highly engaged consumers with an intent to buy. Google AdSense is another popular contextual advertising tool and incorporates AI features for optimization. Amazon also uses AI algorithms to deliver contextual ads within its platform.

How do you choose keywords or categories for contextual targeting?

Depending on your advertising platform, you can use its AI to help you find the best keywords and categories for your contextual targeting campaign.