Tilda Education
Contextual Advertising 101: What It Is &
How It Works
A beginner's guide to common contextual ad types, popular formats, and first steps
Oct 23, 2025
12 min
- Contents
- What Is Contextual Advertising In Simple Terms
- How Contextual Advertising Works
- Main Types Of Paid Search Advertising
- Examples Of Contextual Ads In Search Results & On Websites
- Popular Contextual Advertising Systems & Networks For 2025
- The Cost Of Contextual Advertising
- Pros & Cons Of Contextual Advertising
Contents:
- What Is Contextual Advertising In Simple Terms
- How Contextual Advertising Works
- Main Types Of Paid Search Advertising
- Examples Of Contextual Ads In Search Results & On Websites
- Popular Contextual Advertising Systems & Networks For 2025
- The Cost Of Contextual Advertising
- Pros & Cons Of Contextual Advertising
What Is Contextual Advertising In Simple Terms
Contextual advertising is a type of online promotion. Unlike traditional ads, it's shown only to people who are interested in a specific product or service—like gym classes, bicycle accessories, or manicure ideas.
Usually, contextual advertising services are linked to search engines. Search engines collect a lot of technical data about users—what they search for, where they are, and what device they use—as well as their demographic characteristics such as age, gender, and interests.
Sometimes, instead of a small label, Google clearly marks contextual ads with a prominent "Sponsored results" title.
Sometimes, instead of a small label, Google clearly marks contextual ads with a prominent "Sponsored results" title.
How Contextual Advertising Works
There are different types of contextual advertising, but they all work on the same principles and use similar mechanics. Let's take a look at an example: A beauty salon in Austin, Texas, wants to attract new clients with contextual ads.
1
A beauty salon is the advertiser. Their marketer logs into Google Ads (or another search ad platform) and sets up geo + audience targeting—e.g., women in Austin, age 20+.
2
They build a keyword list—often called a "semantic core": the search requests or queries people type into Google and other engines. For example: "gel manicure Austin", "keratin treatment Austin", "walk-in nail salon near me", etc.
3
Then they add negative keywords to block irrelevant clicks—for example, services the salon doesn’t offer, like "festival braids."
4
Next, they write the ad copy—on their own or with AI—highlight the salon's perks, set bids and budget, connect a payment method, and launch the campaign.
5
All ads go through a review to check for policy violations and ensure compliance (no restricted products, etc.). If everything checks out, the ads get approved and can run.
6
After that, the campaign goes live and ads start showing—but not to everyone. They appear only to users whose search queries match your keywords (e.g., someone searching "nail salon East Austin").
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Main Types Of Paid Search (Contextual) Advertising
Let's move on to the most important part—promoting your services online. This is a key step for small businesses and solopreneurs: It helps you build a strong online presence, find clients, and build lasting relationships. Below, we'll cover where to start, how to run ads, and why a portfolio website matters.
Search Ads
Search ads appear at the top of Google's results when someone types a relevant query. They are called "contextual" because the user's search terms match the keywords in your campaign's list.
Search ads typically look like regular results with a "Sponsored" or "Ad" label and a short text snippet—so they blend naturally into the page while reaching relevant people actively looking for your service.
Here's a typical example—the only visible difference in this result is the "Sponsored" label.
Here's a typical example—the only visible difference in this result is the "Sponsored" label.
Sometimes ads show up as product cards—an image with a caption—so they look a lot like an online store showcase. Advertisers usually choose this format for e-commerce when they need to feature specific products up front.
Here's an example of a shopping ad carousel. The search engine shows photos, prices, and store links up front, letting you compare multiple sellers at a glance.
Display Ads
Some websites and platforms partner with ad networks to display ads on their pages for a fee. The type of ads shown depends on the ad system. For example, Google's network is called the Google Display Network (GDN), which serves a variety of ads across websites, apps, and videos.
Among such ads are not only those tailored to each user's interests—they often show products and services users have already interacted with, such as items they've previously viewed or products left in an abandoned cart. This strategy is known as remarketing, aiming to re-engage potential customers and drive conversions.
Advertisers can choose to exclude certain websites from showing their ads if they know these sites don't attract their target audience. Alternatively, they can select preferred sites where they want their ads to appear.
Among such ads are not only those tailored to each user's interests—they often show products and services users have already interacted with, such as items they've previously viewed or products left in an abandoned cart. This strategy is known as remarketing, aiming to re-engage potential customers and drive conversions.
Advertisers can choose to exclude certain websites from showing their ads if they know these sites don't attract their target audience. Alternatively, they can select preferred sites where they want their ads to appear.
Here's an example from The Times website: An entire area is dedicated to display ads with a corresponding caption.
In-App Ads
Mobile apps, just like websites, can also display ad blocks. Sometimes these ads are contextual, targeting users based on their interests and specific audience profiles.
Especially in free apps, you'll often see ad banners. Apps that request permission to track your data usually do it to personalize ads, increasing the chance you'll see contextual ads.
Examples Of Contextual Ads In Search Results & On Websites
Contextual ads can appear in various formats. Advertisers have the flexibility to customize the appearance of their ads. Let's take a look at the most common formats.
Image (Creative) And Text Caption
This is arguably the most common format. It works for search results, display ad networks, and mobile apps. The text that makes up the title and description often includes keywords from the ad campaign's semantic core.
Here's an example of a bedding ad—a banner with an image and brief text.
Image (Creative) With Text Right On It
This is a less popular format, mostly seen on websites. The user doesn't see the text caption—only the image or GIF promoting the product.
Here's an example of a Nike ad creative dedicated to a new collection.
Only Text That Resembles an Actual Search Result
This is the most common case for contextual ads in search results—it looks almost like a regular (organic) result, aside from the small "Sponsored" tag.
The title is a hyperlink. The rest of the content usually lists benefits relevant to the customer, and many ads also include additional useful or related links, such as Pricing, Contact, About, etc.
The title is a hyperlink. The rest of the content usually lists benefits relevant to the customer, and many ads also include additional useful or related links, such as Pricing, Contact, About, etc.
Popular Contextual Advertising Systems & Networks For 2025
When it comes to contextual advertising, the market is largely monopolized by Google. This is due to the fact that in the early 2000s, several search engines like Yahoo, Bing, MSN, and others were developing at the same speed. However, at some point, Google evolved beyond just a search engine and became a comprehensive ecosystem of tools and services. It later distinguished itself by introducing a more refined and effective contextual advertising model with AdWords (now Google Ads), setting the standard for the whole industry.
Google Ads
Arguably the most famous and popular contextual ad system, it ensures high reach using Google Search and the Google Display Network (GDN). It is widely used by businesses of all sizes and offers a range of ad formats, including text, display, video ads, etc.
Microsoft Advertising (formerly Bing Ads)
Microsoft's pay-per-click platform that runs search and shopping ads across the Bing network (Bing, Yahoo, AOL, and partners), as well as native placements via the Microsoft Audience Network (e.g., MSN, Outlook, Edge, Xbox). It is smaller than Google but often offers cheaper clicks and less competition.
This article covers the basics of contextual advertising, but there's much more to explore.
In the Tilda Digital Marketing Course, a whole chapter is dedicated to the topic. Get the course for free with any annual subscription.
Media.net
A major contextual ad network for publishers (not advertisers), powered by the Yahoo–Bing network, offering display, native/in-content, sticky, and mobile placements.
Taboola
A large native advertising and content-discovery platform that powers "Recommended for you" widgets across major publishers, serving sponsored content in formats such as in-feed, below-article, video, etc.
Ad Management Platforms
Unlike Google Ads or Microsoft Advertising (walled gardens), ad management platforms aren't just media—they're tools for cross-network buying, granular control, and end-to-end reporting.
- Ad servers (e.g., AdButler) help publishers/retailers traffic and manage ads—direct and programmatic—across their own sites/apps.
- DSPs (e.g., StackAdapt) let advertisers buy across many exchanges and channels (open-web display, native, video, CTV, audio), not just one network.
- AI assistants (e.g., Taboola's Abby) streamline setup and optimization inside a specific network.
If you're a small local business, you probably don't need an ad management platform or DSP—start with Google/Microsoft Search, and don't forget Maps/Local, since people often check maps before they even Google.
How Much Does Contextual Advertising Cost?
Contextual advertising offers two primary payment models:
- Cost Per Click (CPC): Paying each time a user clicks on an ad.
- Cost Per Thousand Impressions (CPM): Paying for every 1000 impressions (1000 times an ad is shown), regardless of clicks.
Suppose a new clothing brand has just entered the market and aims to increase its visibility. Their main goal is to be discovered by their target audience and eventually recognized by a larger crowd. This is known as a brand awareness campaign. To achieve this, opting for a CPM model is the most effective choice, as it focuses on maximizing ad exposure and reaching a wide audience.
On the other hand, a local auto dealership doesn't need brand awareness; they need customers. They would likely choose a CPC model, paying only when a potential customer clicks on their ad.
On the other hand, a local auto dealership doesn't need brand awareness; they need customers. They would likely choose a CPC model, paying only when a potential customer clicks on their ad.
The cost per click (CPC) and the cost per thousand impressions (CPM) are not fixed. These prices are determined through an auction system. Multiple advertisers set their bids, and the higher the bid, the more frequently their ads will be shown to users.
Factors that influence ad costs:
- Campaign settings: Advertisers can set their maximum bids—the highest amount they are willing to pay—for clicks or impressions. However, if the bid is lower than that of competitors, the ad will be shown less often. If the bid is too low, there's a risk the ad won't be shown at all.
- Competition in the niche: The more competitors in a specific industry, the more aggressive the bidding will be. This leads to higher ad costs.
- Industry type: Certain industries, like real estate, tend to have higher ad costs than others due to the competitive nature of the market.
- Good Click-Through Rate (CTR): If an ad has a high click-through rate, the ad system may lower the cost for displaying or clicking on it. This happens because a high CTR indicates that the ad is effective and engaging.
- Ad placement: Prices can vary significantly based on where the ad is placed. For example, ads in the top search result position typically cost more than those further down the page.
To avoid overspending due to fluctuating bids, advertisers can use bid management strategies or third-party tools that automate the process. These strategies and tools dynamically adjust bids based on changing conditions, helping to optimize CPC or CPM rates.
To get a rough idea of how much ads can cost and what ad budget you should set, you can consult with advertising agencies or look for real case studies in your industry on different platforms like WordStream and HubSpot.
Pros & Cons Of Contextual Advertising
Contextual advertising is a popular and effective method of online promotion, but it's definitely not a one-size-fits-all solution. It works well for certain products and target audiences, but it may not be the best fit for niche markets or industries where search volume is low.
It's almost always a way to go for:
- Well-known products that are frequently searched for online—otherwise, there won't be anyone for the search engine to show the ads to.
- Products with a broad target audience—if the target audience is narrow, there will be fewer impressions and clicks.
- Products that encourage quick purchasing decisions, like impulse buys from a single glance at an ad.
- Products in extremely high demand—for example, when someone needs something urgently, like a tow truck for a broken-down car.
However, contextual advertising can be expensive, and mistakes in the campaign can quickly drain the budget or even harm the business. Moreover, there are industries where it simply isn't suitable. For example, niche products that no one is searching for in search engines would not benefit from contextual advertising.
Let's take a closer look at the advantages and disadvantages of contextual ads.
Contextual advertising is a powerful but complex tool. It's best to launch your first campaign with a limited test budget and, ideally, under the supervision of someone more experienced. However, once you learn how to use it, you can reach thousands of relevant and interested people in just a matter of days.
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