Earlier this year, both Google and Overture announced that they would be introducing contextual, or targeted content text ads, appearing at an ever increasing network of content partners. Although closely related in many ways to more traditional search based ads, these contextual ads were staked on new online real estate, giving both search performance marketers an additional revenue channel. Originally, the ads were hailed as the next great step forward in online marketing channels. Now, it seems the jury has been out on these ads for a prolonged recess.

So, What are Contextual Text Ads?

The concept is fairly simple. Search engines are able to crawl individual web pages to determine the content of that page. They also have thousands of advertisers who are willing to pay to have their ads appear with relevant content. It was just a matter of time before someone realized the potential and put the two parts of the equation together.

Here’s how it works. A content portal (let’s say howstuffworks.com) becomes a distribution partner for Google’s AdSense contextual program. The Google spider searches a page on the site and discovers it’s about MP3 players. It finds an advertiser who wants their ad to show to anyone interested in MP3 players, and that ad is served up the next time someone goes to that page. Contextual ads also show on the internal search results page in the site, tied to the keywords used in the search.

Is this New?

No. eZula and Gator have been selling contextual advertising based on site content for years now. The difference is, both eZula and Gator try to hijack visitors without the permission of site publishers; eZula through a plug in that highlighted relevant terms and provided a link to the advertiser's site, and Gator through the use of pop up windows that launch over the visited site. Google and Overture’s program places the ad in the actual page with the full permission of the site publisher. In fact, the publisher gets a healthy slice of the resulting revenue.

Why Search Engines Love the Concept

Contextual ads are great news for the search engines, because they open up a virtually unlimited inventory of possible advertising. Before this, the search engines were limited by screen real estate on their own search results page, the user's insistence that search results not be overrun with paid listings, the volume of searches and the number of available keyphrases to bid on. Now, search engines can show results on a virtually unlimited number of sites. It’s like a newspaper finding a way to run their ads in any newspaper or magazine published anywhere in the world. When you look at contextual advertising in those terms, you’ll understand why search engines love the idea.

Of course, there’s a fundamental issue here that marks a big difference in how contextual ads will likely perform compared to search ads. One is intrusive marketing, and the other is invited. I’ll explain.  When you do a search on a search engine, you’re looking for information on a product or service. Your resistance to advertising is low, because you’re in a receptive frame of mind. As long as the ad looks relevant to what you’re looking and the ad copy is enticing, there’s a very high likelihood to click through to the advertiser’s site.

If you’re on an information site, however, looking for information about how MP3 players work, you’re not necessarily looking to buy one at that time. To use a more traditional marketing analogy, it’s like comparing a yellow page ad to a well placed newspaper ad. It’s not to say that newspaper ads aren’t effective, but just don’t expect the same conversion rates as you get with the yellow pages.

Same Ad, Different Marketing Channel

There’s nothing wrong with this fundamental difference between contextual and search results advertising, as long as the advertiser is aware of the difference. But because contextual advertising has come about as a logical extension of search results advertising, this difference is often overlooked, sometimes intentionally, in the promotion of the new marketing channel. Google did nothing to avoid this mistake perception when they first offered contextual advertising to its AdWords advertisers as a bonus. Anyone using AdWords got a Contextual Campaign with no additional set up fees. Although this presented advertisers with a painless way to try the new channel, it also removed any perceived differences between the two programs in their minds.

By not clearly outlining the difference between the two channels, both Google and Overture run the risk of advertisers going in expecting similar click through and conversion rates to what they’re achieving with the search listing campaigns. This could backfire, as a study by MarketingSherpa discovered, when advertisers are disappointed with less than stellar results.

Right Ad, Wrong Page

Of course, even with more conservative estimates of performance metrics, we’re assuming that the ad delivered is relevant and appropriate to the content it’s being displayed with. That isn’t always the case with contextual ads. The delivery is only as smart as the spider, and in some cases, that can leave a lot to be desired. For example, a spider can crawl a page to see what words appear, but it’s not very good about interpreting the tone of the message that is made up of those words. I found one particularly disturbing instance on a blog site.

The Chicago Sun Times has an article on their site about a porch collapsing at a party and killing 12 people. A friend of one of the victims was looking for more information online and came across the online article. He was shocked to see two contextual ads at the bottom of the story advertising providers of deck construction materials. It was a macabre and disturbing footnote that was probably not what the Sun Times or the advertisers intended. Unfortunately, it happened, and will happen over and over again as long as the determination of which ads are delivered is an automated process.

Is a Text Ad Enough?

Another concept that will have to prove itself out in practice is whether a text ad is enough to catch attention given the more graphical nature of many of the sites they’ll appear on.

When a Google AdWord ad appears on a page of search results, Google can control the presentation of the page to make sure that the ad isn’t lost in graphical clutter. Search engines, by their nature, tend to remain utilitarian in their interfaces. Google has adhered to this principle scrupulously throughout its history. A hand full of words with a muted color background can and does stand out in a page of search results, especially when everything shown on the page is relevant to what the visitor expected to see.

But in the more graphically intense environment of an information portal, will that same text ad catch a visitor’s attention, especially when the ad wasn’t what the visitor came to the page to see? There really isn’t a broad body of user behavior research to test this against. Doubleclick and other online advertising providers have found that response rates are significantly higher to rich media ads than static ones. But anecdotal evidence shows that serious consumers relate to text based ads better than static graphical ones, probably because they’re subconsciously relating them to search results.

If it emerges that text based ads don’t convert well in an information portal environment, expect to see a rapidly escalating competition between Overture and Google to offer more flexibility in including graphics and perhaps other rich media in their contextual offerings. And when that occurs, the only thing differentiating contextual campaigns from more traditional online banner campaigns will be the success of the spider in determining the relevance of the supporting content on the web page.

One last word on this topic. Most of the major search engines have tried banner campaigns tied to specific relevant keyword searches. None have been that successful.

But Do They Work?

So, how do the new contextual ads work? Unfortunately, no definitive research exists comparing contextual click throughs and conversions with search listing ad performance. MarketingSherpa did an informal survey on the Google program with its readers and found that generally, click through rates were quite a bit lower on contextual campaigns than on search results campaigns. One reader who typically got 4 to 6% click through rates with AdWords received less than .001% click through with the contextual ads.

For more on the MarketingSherpa survey, see http://library.marketingsherpa.com/barrier.cfm?CID=2314.
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If it’s Pay per Click, Why Should You Care?

But, you say, if you’re paying per click, then lower click throughs aren’t really hurting you, are they? Unfortunately, with the few respondents that track conversions, the MarketingSherpa report found the quality of the leads coming through the contextual campaign was less than with search generated leads. Conversion rates, time spent on site and pages visited were all less with contextual campaign generated leads than with search leads. One respondent, who was thrilled to find her click throughs were actually higher with her contextual advertisements, had her enthusiasm dampened considerably when she found that the visitors clicking through were almost immediately leaving her site again. Conversion rates were practically zero.

DoubleClick and Ebay Introduce another Variation of Contextual Advertising

A recent announcement opened up another interesting option for online marketers. Using DoubleClick’s DART for Publishers solution, advertisers will be able to bid on specific keyphrases and have their ads appear next to search results. In this case, perhaps the best known publisher and marketplace on the web has realized the potential of contextual advertising and has provided their own solution to monetize this traffic. (For more on this announcement, see http://www.auctionbytes.com/cab/abn/y03/m06/i24/s01)

Jury Will Be Out for Awhile.

In any case, it will take awhile to accurately judge the effectiveness of Overture and Google’s contextual advertising programs. The fact that it is new is going to introduce a number of inconsistencies into the actual performance of these campaigns. Curiosity alone will account for a number of click throughs. Once visitors get used to seeing the ads and the dust settles, we should get a much clearer picture of how effective this new advertising channel will be.