Mar 14 2024
Ben Larrison

Why Contextual Targeting in Digital Advertising Is Here to Stay


The forthcoming “cookie-pocalypse” marks a pivotal moment in the advertising industry, as marketers grapple with a privacy-centric landscape and widespread signal loss.

Factors like Apple’s App Tracking Transparency, new and ever-evolving digital advertising regulations, and privacy demands from consumers have driven the shift to privacy-first advertising in recent years. Now, with Google appearing set to deprecate third-party cookies in its Chrome browser by the end of 2024, we are on the brink of a new age of advertising—one where cookieless solutions reign supreme, and where alternative identity solutions are not simply a suggestion but a requirement.

Of those cookieless solutions, contextual might not be the shiniest one: It’s been around for a while and, candidly, it’s kind of boring. But in rare and exceptional instances such as this, old + boring doesn’t necessarily have to = bad. Just ask baseball fans, or anyone in the middle of a riveting game of Monopoly!

So, what is contextual targeting, how does it work, and why is it here to stay in the digital advertising landscape? Read on to find out!

What Is Contextual Targeting?

Contextual targeting works by serving ads on a website, webpage, or other digital channel based on the content it contains. Essentially, it displays contextually relevant ads alongside content that is likely to appeal to a target audience. Heard an ad for a home security system while listening to a true crime podcast? Or seen an ad for a meal delivery service while reading a recipe on your favorite food blogger’s site? These are both examples of contextual targeting at work.

Instead of tapping into user ID-based data that was collected or bought to show ads to specific consumers (i.e., someone looked at a website for home security systems, so now I’m going to target them with ads about my home security offerings), contextual targeting uses keywords, topics, semantics, geography, and other factors to reach consumers in the spaces where they spend time (i.e., I’m going to target ads about my home security offerings to the audience of a true crime podcast, as security may be top of mind for many of those listeners).

Contextual targeting is a bit of a throwback, harkening back to mediums like linear TV, print, and terrestrial radio—in other words, places where third-party cookies do not exist. But the solution is much more adaptable in digital advertising settings, making it a sensible (if not increasingly critical) element of modern marketing strategies. Heck, even Google has embraced foundational elements of contextual targeting with Topics API, part of the search giant’s proposed solution to third-party cookie deprecation in its Chrome browser.

How Does Contextual Targeting Work?

Contextually relevant environments are found through keywords, topics, intent analyses, emotional tone, geography, contextual synonyms, negative keywords, and other parameters provided by an advertiser. For instance, a computer brand might target the keyword “apple” and use intent analyses, a specific type of semantic targeting, to distinguish between people looking for “apple” the fruit and people looking for the tech brand, to ensure their ads are served to the correct audience.

Once those parameters have been set, contextual advertising technology scans webpage or app text, images, multimedia elements, page structure, geographic parameters, and more to determine the best match for your advertisements. You can also add additional parameters in a demand side platform (DSP) like dayparting, bids, ad unit type, and even cross-device targeting. From there, all you have to do is submit a programmatic bid through your DSP to place your ad on any contextually relevant pages and/or environments. And with new content cropping up—across webpages, podcasts, connected TV content, and more—you can get as broad or specific as you want.

Contextual targeting is typically seen as an ideal solution in more privacy-friendly browsers such as Firefox and Safari, or on privacy-minded operating systems like iOS. And, as more and more advertising teams have tapped into contextual, it has evolved far beyond just display: Digital advertisers can take advantage of contextual targeting on channels like connected TV (CTV), audio, and digital out-of-home (DOOH) as well.

How to Leverage Different Types of Contextual Targeting

There are a variety of types of contextual targeting, as well as a whole host of different channels that support this tactic.

Keyword and topic targeting allow advertisers to align their ads with specific search terms or thematic contexts. And, thanks to advancements in AI and machine learning, advertisers can now take contextual a step further with semantic targeting. Semantic targeting adds a layer of sophistication to contextual targeting by aligning ads with the meaning and sentiment of the surrounding material (think back to our earlier example about search ads focused on the keyword “apple”). Additionally, advertising teams might opt for a geo-based contextual targeting approach, which ensures ads are placed where they’ll be most meaningful to the people who spend time in a certain place. This is a particularly potent approach for localized campaigns—for example, a museum might leverage geo-based DOOH ads in local tourist hotspots to drive visits.

And what about when it comes to different channels? From display, to social media, to digital audio, digital out-of-home and beyond, there are opportunities to leverage contextual tactics across a variety of digital formats. Digital audio tends to lend itself quite effectively to topic-based and semantic contextual targeting. This could look like a beauty brand focusing on podcasts in the health and wellness categories, or a virtual therapy company homing in on content focused on self-improvement. Digital out-of-home, on the other hand, provides the opportunity to lean into geo-based contextual tactics. For example, a grocery store might focus on placements in transit centers near their brick-and-mortar location, knowing that commuters are both nearby and might be thinking about what groceries they have at home as they make their evening commute. Connected TV and streaming TV allow for topic, semantic, and keyword-based contextual approaches where, for instance, a sports betting company might choose to focus on content focused on, well, sports. By using different types of contextual targeting across these varied channels, advertisers can craft a holistic, impactful, and privacy-friendly experience for audiences.

Contextual Targeting for Cookieless Advertising

Contextual targeting allows advertisers to reach their audiences in contextually relevant environments at the right place at the right time—all while respecting their privacy.

Since it doesn't rely upon personal data, contextual targeting neatly sidesteps the entire privacy issue. That makes contextual a robust and compatible solution for a world where consumers, legislators, and advertisers are putting privacy at the forefront. For display ads, it also adds an additional layer of filtering for page quality, helping boost your brand safety by avoiding lower-quality content and pages that don’t align with your brand standards.

Though it doesn’t rely upon personal data, contextual targeting can be used alongside first-party data to make ads even more personalized and effective. For instance, some platforms offer advertisers the option to use their first-party data to predict which contextual targeting categories will perform best for a brand or campaign, across channels including desktop, mobile apps, and CTV.

Additionally, while it may not be at the top of some organizations’ motivating factors when choosing a targeting solution, contextual targeting is a much more comprehensible and palatable advertising method to people outside the ad industry, who can both grasp and accept the idea of seeing ads that are geared toward a specific situation rather than a specific person. Think of it this way: If you were describing the digital advertising industry to an octogenarian, would it be easier to explain contextual targeting or, say, cross-device programmatic retargeting?

That said, one of the more notable drawbacks of contextual targeting when compared to other methods of digital advertising is that it’s harder to both retarget specific users and to fully track results—particularly in industries with longer sales cycles. As such, most advertisers will find contextual targeting most effective when leveraged alongside other privacy-friendly tactics, rather than as a singular approach.

Contextual Targeting Is Cost Effective

In addition to its privacy friendliness, contextual targeting comes with the added benefit of being significantly cheaper than most user ID-based targeting solutions. While the CPM for user ID-based ads can run between $1-2, the CPM for a contextual ad display placement can be as low as 5-10 cents—in other words, you only need your contextual ads to be 10% as effective to see the same results.

Granted, this number ultimately depends on how niche the audience—and how competitive the placement—but those same principles can apply to just about any ad targeting type. The important takeaway is that, on the aggregate, contextual targeting is likely to be more cost efficient than user ID-based targeting.

Wrapping Up: Why Contextual Targeting Is Here to Stay

As the advertising industry navigates the complexities of consumer privacy demands and third-party cookie deprecation, contextual targeting offers significant benefits. Not only is contextual an inherently privacy-friendly targeting approach, but it also offers a cost-effective alternative to user ID-based targeting. From display to audio to digital out-of-home and beyond, contextual is adaptable across various digital formats. And though it may be a bit less flashy than other privacy-first options, contextual targeting provides a practical, effective, and digestible solution that helps brands reach their audiences.

Looking for a deeper dive into how advertising professionals are preparing (or not preparing) for increased signal loss and a world without third-party cookies? Basis surveyed more than 200 marketing and advertising professionals across top agencies, brands, non-profits, and publishers to gauge their feelings on privacy and identity as we stand on the precipice of total third-party cookie deprecation. Learn more in our report, Identity vs. Privacy: Digital Advertising in a Cookieless World.

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