Business 2.0 writes about what is becoming a growing and effective component of the online advertising business – ads that match what one is reading. This is almost the Holy Grail of advertising, where ads are not really ads, but relevant editorial.
The breakthrough, which I’ll call “contextual advertising,” involves commercial links that appear adjacent to relevant content on websites. Say you’re at Caranddriver.com, reading a review of the Acura MDX. In place of banners for everything from cell phones to cars you don’t care about, you would see paid text links advertising the Acura website, the Edmunds auto comparison site, and leasing companies vying for your business. These are the same links you’d see if you typed “Acura MDX” into Overture’s client portals, like MSN or Yahoo.
Google also plays in this new market with an offering called “content-targeted advertising.” The beauty of both is their ease of use for publishers: Overture and Google automatically analyze the publishers’ pages and insert relevant links on the fly. All the publishers have to do is collect a check. It’s close to manna from heaven.
This natural evolution of the search engine business closes the loop linking search, content, and ad dollars. In the past few years, marketers of all stripes (about 175,000, at last count) have learned to buy paid listings, or sponsored links placed next to “pure” search results. This phenomenon has created billions in annual revenues and a growth rate approaching triple digits. The reason is simple: Paid search is an incredibly efficient way to bring in sales leads — it’s the Yellow Pages, classifieds, and direct mail rolled into a single just-in-time pitch.
This is a new revenue source for the entire Web, one that not only is unobtrusive but, because it’s based on relevance, might even be useful to readers. Contextual advertising “could be much larger than the paid search market,” claims Bill Demas, senior vice president at Overture. Google’s Wojcicki seconds his assertion.