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Contextual advertising is a form of targeted advertising for advertisements appearing on websites or other media, such as content displayed in mobile browsers. The advertisements themselves are selected and served by automated systems based on the identity of the user and the content displayed.
How contextual advertising works
A contextual advertising system scans the text of a website for keywords and returns advertisements to the webpage based on those keywords.  The advertisements may be displayed on the webpage or as pop-up ads. For example, if the user is viewing a website pertaining to sports and that website uses contextual advertising, the user may see advertisements for sports-related companies, such as memorabilia dealers or ticket sellers. Contextual advertising is also used by search engines to display advertisements on their search results pages based on the keywords in the user's query.
Contextual advertising is a form of targeted advertising in which the content of an ad is in direct correlation to the content of the web page the user is viewing. For example, if you are visiting a website concerning travelling in Europe and see that an ad pops up offering a special price on a flight to Italy, that’s contextual advertising. Contextual advertising is also called “In-Text” advertising or “In-Context” technology.
Apart from that when a visitor doesn't click on the ad in a go through time (a minimum time a user must click on the ad) the ad is automatically changed to next relevant ad showing the option below of going back to the previous ad.
Since the advent of AdSense, Yahoo! Bing Network Contextual Ads, Microsoft adCenter, Advertising.com, ads.hsoub.com Sponsored Listings (formerly Quigo) and others have been gearing up to make similar offerings.
Contextual advertising has made a major impact on earnings of many websites. Because the advertisements are more targeted, they are more likely to be clicked, thus generating revenue for the owner of the website (and the server of the advertisement). A large part of Google's earnings is from its share of the contextual advertisements served on the millions of webpages running the AdSense program.
Contextual advertising has attracted some controversy through the use of techniques such as third-party hyperlinking, where a third-party installs software onto a user's computer that interacts with the web browser. Keywords on a webpage are displayed as hyperlinks that lead to advertisers. Additionally, concerns have been voiced by publishers that there is significant 'data leakage' when working with contextual ad networks. This data leakage can come in the form of a contextual ad network tracking all users on the publisher's site, for their own internal use, or for later retargeting. The ad network can also use all contextual data on pages where all their web beacons have been placed for use with their own clients, without any knowledge by the publisher. 
- Creation — what the advertisement looks like
- Media planning — where the advertisements are to be run
- Media buying — how the advertisements are paid for
Contextual advertising replaces the media planning component. Instead of humans choosing placement options, that function is replaced with computers facilitating the placement across thousands of websites.
- Browser security
- Advertising network
- Editorial-related advertising
- In-text advertising
- In-image advertising
- Semantic targeting
- Native advertising
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- "Proximic Signs Deals With Yahoo and eBay To Turn Product Listings Into Contextual Ads; Taking on AdSense". Retrieved 2008-01-15.
- "Top Online Display Ad Networks". Thalamus. Thalamus. Retrieved 7 September 2015.
- "Customers Now", David Szetela, 2009[not specific enough to verify]
- McDermott, John. "WTF is data leakage?". Digiday. Digiday. Retrieved 7 September 2015.
- Ferguson, Renee Boucher. "A Battle Is Brewing Over Online Behavioral Advertising". www.eweek.com. Retrieved 2008-10-20.
- Ostrow, Adam. "When Contextual Advertising Goes Horribly Wrong - Mashable". mashable.com. Retrieved 2008-10-20.
- "FTC Staff Proposes Online Behavioral Advertising Privacy Principles". www.ftc.gov. Retrieved 2008-10-20.
- Kenny, D. and Marshall, J. (November–December 2000). "Contextual Marketing: The Real Business of the Internet". Harvard Business Review. Retrieved 2008-07-22.
- Revesencio, Jonha (2015-04-09). "CRM Retargeting: How It Works and Everything You Need to Know Before Using It - Huffington Post". huffingtonpost.com. Retrieved 2015-04-09.