Programmatic Advertising 101: How Does Contextual Targeting Work?

Each month, Basis Technologies’ Programmatic 101 series tackles a different facet of programmatic advertising—from best practices for buyers, to competitors in the space, to trends you should know.

Thanks to consumer demand for both privacy in advertising and relevant and personalized ad messaging, contextual targeting is having a moment. With 61% of advertisers expecting to see an increase in buy-side budgeting for contextual-based campaigns, it's important for marketers to understand how this targeting method works, as well as the benefits it offers.

Ready to get clear on all things contextual? Let's dive in:

What is Contextual Targeting?

Contextual targeting is a tactic that allows advertisers to target according to the content of a webpage, instead of according to user IDs or behavioral data. Contextual segments are categorized based on the keywords found in the digital spaces where consumers spend time, or the topics that characterize those spaces. For example, if you’re served an ad about paint products while reading an article about the best way to paint smooth walls, you were served a contextual ad.

Contextual targeting can be utilized for a full funnel strategy: It's often leveraged to drive awareness of a new brand or product, increase creative engagement, and drive traffic to an advertiser’s website.

Contextual Targeting vs. Behavioral Targeting

When an advertiser uses contextual targeting, the content of the ad aligns with the content of the website. In contrast, behavioral targeting leverages a web user's past browsing behavior to serve relevant ads.

For example, if you Googled "holiday gifts for my dog," and were later shown an ad for puppy pajamas, that ad was served to you via behavioral targeting.

Contextual Targeting Benefits

Let's dig into some of the top benefits of contextual targeting:

1. Brand Safe

Unlike other types of targeting that prioritize user behavior or past website actions, contextual targeting focuses on content, which allows advertisers greater control over where their ads show up—and more importantly, where they don’t show up.

2. Cookie Free

Consumers are more comfortable with contextual than other forms of targeting, as it's easy to understand how the ads are served, and feels like less of a privacy violation as a result. As marketers prepare for the eventual demise of third-party cookies, contextual targeting offers a tried-and-tested, cookie-free solution that brands can (and should!) start testing and refining now.

3. Cost-Efficient

Contextual targeting is more cost-efficient than behavioral targeting when it comes to cost-per-click (CPC), cost-per-viewable impression (vCPM), and cost per thousand impressions (CPM). This targeting tactic can also offset the higher data fees that come with first- and third-party data.

4. Reach Niche Audiences

Contextual targeting is a fantastic solution for advertisers trying to reach audience segments that are unique or hard to define based on website actions. For example, if you're a hot dog brand trying to find relish enthusiasts or a cannabis brand who wants to reach indie festival attendees, contextual targeting allows the granularity needed to build these custom segments.

The Future of Contextual Targeting

As a result of more and more advertisers tapping into this tactic, contextual is evolving. Publishers are using technology to decipher the context of both images and videos in order to add additional scale for advertisers, and advertising platforms are leveraging AI to understand the sentiment of online articles to further help brands decide where they should run their display and video ads.

The takeaway for advertisers? This targeting tactic isn't going anywhere—and it will continue to develop and mature as we move towards a more privacy-friendly world.

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Want to become even more of a contextual targeting expert? Get certified with AdTech Academy's contextual targeting certification!