A month ago today, the team responsible for Google's AdSense played darts and snacked on popcorn at a small outdoor barbecue to celebrate the one-year anniversary of the contextual advertising program. The dunking tank was nixed, said Google director of content media Kurt Abrahamson, joking, "I would have been the target."
What launched as a program for publishers with 20-million-plus page views a month, like Knight Ridder and HowStuffWorks, has grown to include "thousands" of sites, thanks to Google opening it up to smaller players last June. "We've seen a steady increase. We have thousands of publishers, and that number continues to grow," said Abrahamson. "It is a nice additional stream of revenue that doesn't cannibalize a Web publisher's sales efforts."
And where Google is, its main rival in search marketing is sure to be. Last June, Yahoo!-owned Overture launched its own contextual-advertising product, Content Match.
Since then, the two companies have been competing for contextual ad contracts with large publishers. Just last week, CNN.com, ESPN.com and WSJ.com struck deals with Overture for its product. Some recent signings for Mountain View, Calif.-based Google include CNet and CareerBuilder. Publishers admit that when they consider one, they inevitably review the other.
Hoping to bask in the afterglow of search advertising's glorious ascent, legions of Web publishers have been adopting these relevant text-based ads that appear in shaded boxes alongside, below or within their editorial content.
Large Web publishers use words like "significant" and "material" to describe how much revenue they expect to reap from this ad format, which, in most cases, supplements their display and classified advertising income. "It has the potential to be a powerful revenue driver for us," said Riley McDonough, vp of sales at ESPN.com.
"Basically, these publishers love contextual ads because they deliver more revenue per page than run-of-site banner ads. These are pages historically that have been difficult to monetize well—general news pages, sports pages, entertainment news," said Charlene Li, principal analyst at Forrester Research.
The Boston-based research firm estimates that contextual listing spending will rise from $48 million in 2003 to $578 million in 2008, or roughly 10 percent of total search marketing spend.
"It provides more opportunities to advertisers to participate with our audience and therefore, it's an incremental revenue stream," said Adriann Bouten, vp of technology and business development at USAToday.com, which has used Google's AdSense product for over a year.
David Payne, svp and general manager at CNN.com, which will start showing Overture's Content Match ads within the next six weeks, observed, "In effect, all of our pages are pre-sold on a base of a couple hundred thousand advertisers. So, we don't have to worry about unsold inventory because potentially every page of our site will have a match with a keyword that's been bidded on by advertisers."
Calling contextual advertising "the Web's response to product placement," G2 principal analyst Denise Garcia said, "It's somewhat blurring the line between advertising and content. … It seems to be that the market in general is looking toward new ways of placing [ads] online and offline, and this is the online response to that."
In addition to Overture and Google, other companies such as Kanoodle, Industry Brains and Vibrant Media offer versions of contextual ad programs. Vibrant Media's IntelliTXT technology, for instance, double-underlines keywords that advertisers have bid on within editorial news stories; when a user mouses over the highlighted word, a small ad pops up.
Contextual advertising, or the idea of placing ads relevant to content, has existed for ages. How it's done on the Web, however, is new. Both Overture and Google use an algorithmic engine to process the text on Web pages and match it to keywords that advertisers in their database have bid on.
No matter how intelligent the technology, though, mistakes happen, some of which undoubtedly will become a thing of urban legend. By now, everyone in the online ad realm has heard the one about a Samsonite ad appearing next to a story about body parts being found in a suitcase. USAToday.com's Bouten cited a more recent example: An ad for steroids was served in response to a news story of steroid abuse.
How did the online newspaper deal with it? The ad was removed "swiftly and quickly," Bouten said. "It's not a mistake that was made by either party because you can't anticipate those types of situations. We have a good process to be able to deal with it as it happens," he said, recalling only three incidents in the last year. "I can't sit here and promise that it will never happen again because of the open nature of the sponsored links advertising."
It's an imperfect science, but it's improving. Google, for instance, has a team of linguists who use their understanding of words and word grouping to fine-tune the technology, so it doesn't serve ads in inappropriate places.
Overture pairs its technology with a staff of 100 editors, who control the process on some pages that call for more attention, such as section fronts. "There is a sweet spot between marrying both the editorial team and the engineering talent that we have to build the best product," said Paul Volen, vp of product partner marketing at Pasadena, Calif.-based Overture. "As we rolled this product out, we started hearing from publishers: 'Hey, we think dynamic works on some pages and some content. But we also like the safety, comfort and control of knowing there's an editorial team choosing the appropriate keywords and listings on some select content.' "
The honing continues. Two weeks ago, Google said it plans to reduce the cost a marketer pays for clicks on a page in its content network if data finds that a click is less likely to generate business results. For instance, a click on an ad for digital cameras on a Web page about photography tips may be worth less than a click on the same ad appearing next to a review for digital cameras.
At the end of the day, publishers, providers, advertisers and agencies alike agree that context is king. "As long as the advertising is relevant to those articles and to the editorial, it will work. It's really the responsibility of both the advertisers and publishers to make sure they continue to make those ads relevant," said James Kiernan, associate media director at Interpublic Group's FCBi, which develops contextual ad opportunities for clients such as Hewlett-Packard and Qwest.
"At the point the opportunity starts to get exploited ... that's where you're going to get user skepticism and reluctance to click on those links," he said.