The CEO of ContextWeb provides descriptions, and highlights the pros and cons of three types of online targeting.

Search. Behavioral targeting. Contextual advertising.

These are just some of the terms floating around in cyberspace within the crowded and complex industry of online advertising. As the Internet continues to evolve and as new players and technologies emerge, marketers are under increasing pressure to spend their budgets wisely and choose online advertising solutions with high potential for generating significant returns on their investments.

With so many online advertising vendors each claiming superiority and the ability to generate powerful and measurable results for their customers, it is inevitable that, at some point, even the savviest marketer will experience confusion regarding which solution to choose. To combat this, it is critical for marketers to be informed about the various options in order to develop their online ad campaigns.

So, what exactly are the differences between search engine marketing, behavioral targeting and contextual advertising? What are the pros and cons of each? And what can marketers expect in the year ahead?

Let’s examine.

Search

Search-based advertising refers to the ads that appear on a Web page after a search has been conducted. Everyone has seen and is familiar with these kinds of ads and, for that reason, search advertising continues to soar in popularity. However, the lack of relevant ads that are generated is an issue worth examining. While search has merit as an effective marketing tool, advertisements go unnoticed if they are not appropriately aligned with the interests of the user. This happens frequently with a specific keyword, chosen by the advertiser that may have more than one meaning. Take the following example: A potential customer types in the word “matrix” because they are interested in purchasing a Toyota Matrix. Instead of being presented with ads about the automobile, the user sees ads for the movie and hair care line by the same name. The end result, due to the lack of relevancy, is a lower click-through rate and opportunity to sell.

In addition, search engine marketing provides limited available space for advertising as, according to stats from the Online Publishers Association, users search the Web only 5 percent of the time and browse the other 95 percent of the time. The supply being low makes the cost of search engine marketing increase every year, thereby making it less cost effective for advertisers.

It becomes apparent that advertisers should question whether search is the best method for capturing the interest of potential customers.

Behavioral Targeting

As its name implies, behavioral targeting monitors the behavior of an individual as he or she moves from site to site. Ads are then generated to correlate with this behavior. For example, when using behavioral targeting, a marketer can tell if a user spends time searching for a new car on the Toyota Web site and then a short time later visits a content site. Through the technology, the user, when on the content site, will be served an advertisement enticing them to purchase a Toyota car.

Behavioral targeting can often provide more bang for the buck, allowing an advertiser to appeal to consumers with different ads based on their past behavior, even as they view the same Web page. The downside is that behavioral targeting has been considered by many to be invasive. Despite the fact that information is not shared or made available to the public, concern over possible identify theft and lack of consumer trust are issues marketers must consider when selecting this kind of solution.

Another downside of behavioral is that it doesn’t necessarily keep up with a consumer’s current mindset.

Contextual Advertising

While behavioral targeting monitors the behavior of the online user, contextual advertising focuses solely on content. Contextual advertising and the Internet are a perfect match because they are both centered around dynamic information. Contextual advertising is a compelling offering for marketers because as the content of a Web page changes, so do the ads. As an individual browses the Web and moves from page to page, they are presented with advertisements that are deeply relevant to what they are reading.

True contextual advertising does not download any software on a user’s computer and relies on relationships between online advertisers and Web publishers to market to consumers. In addition, best of breed contextual advertising is smart -- it knows the difference between heiress Paris Hilton, Paris, France and Paris, Texas -- and will never deliver an ad about the “The Simple Life” when an individual is interested in learning about the savoir-vivre of the French. The high degree of an ad’s content relevancy promises the potential for a higher click-through rate and an increase in sales and profitability.

What’s Ahead

Jupiter Research forecast $7.6 billion will have been spent in the U.S. on all forms of online advertising by the end of 2004 (up 20 percent from 2003). We can expect that this trend will continue in 2005 as the importance of relevancy in online advertising continues to grow. Today’s busy, technologically savvy consumer demands advertisements about products and services they care about; ads that are too general or not contextually relevant will die off as more sophisticated campaigns will prosper.

The search market will continue to thrive, but marketers will look to a variety of areas to spend their online budgets. As the search market becomes saturated and costs soar, they will look to more cost effective, targeted marketing technologies. This is precisely where behavioral and contextual advertising will come into play.

Marketers can expect for contextual advertising and behavioral targeting to begin to work together and become more integrated, in specific instances when either solution does not work well on its own. For example, a Web site that has pages that cannot be contextualized, such as a home page, will generally not benefit from contextual advertising. In this case, tracking a user’s behavior is a more strategic tactic. On the flip side, for the same Web site’s content pages, using contextual advertising to show relevant ads makes the experience more beneficial to both the marketer and potential customer. In this way, contextual advertising and behavioral targeting will fuse, offering marketers a highly sophisticated solution for their online ad campaigns.

Marketers need to be smart about where to spend their online budgets in order to achieve the most cost-effective results. They need to look to improve the relevancy of their campaigns by using technologies that fill this need. When users see relevant advertisements it not only enhances their user experience, but also increases the likelihood of sales.

Anand Subramanian is Chief Executive Officer of ContextWeb, Inc. Mr. Subramanian has 15 years of experience building and leading successful businesses and has deep domain knowledge in the Internet, product development, technology sales and consulting. Prior to ContextWeb, Mr. Subramanian was the Vice President of Product Development at Gobi, Inc., a home computing and Internet connectivity company. Before joining Gobi, Mr. Subramanian managed a team of technology consultants and sales staff for Mastech Systems Corporation and was responsible for national accounts such as AT&T, Bellcore and MCI. Mr. Subramanian also built a healthcare software company in Bombay, India which he successfully ran for several years. He holds a Bachelor of Technology degree from the Indian Institute of Technology (IIT).