Contextual advertising is targeted advertising that typically occurs on a banner or pop-up ad on a website. Contextual ad systems target advertising to a specific user based on the keywords on the page he or she is visiting (hence, the context of the ad comes into play). Search engine advertising is also a form of contextual advertising, since the ads that appear in the results are based on the keywords the searcher uses. Publishers and advertisers bid for the use of keywords in an auction system run by a contextual advertising company. Publishers and advertisers only profit from the advertisement when a user clicks on the ad in what’s commonly known as pay-per-click or PPC advertising.
Contextual advertising has caused some alarm because of the potential privacy issues and the occasional installation of software onto a user’s computer through a process known as third-party hyperlinking. In this system, the software searches the context of the page, site, or the user’s history and then displays advertisements related to the content in the form of hyperlinked PPC keywords instead of regular banners.