There are many companies in e-commerce that will provide contextual ads for web pages. They all work approximately the same way, so I’ll focus my attention on the largest of these networks: Adsense, which is a Google owned enterprise.
How It Works:
In contextual advertising, you place a snippet of code on a web page. When that page is published to the web, that code sends a signal to the advertising company (Google Adsense) announcing its existence.
Then a spider (special software) crawls that page to determine what the content is, i.e., what it is about. Once it determines the nature of the content (by finding keywords and key phrases), it automatically populates the advertising space on your page with advertising that is related to that content.
Like the infomercial for some product says, “Set it and forget it?” You don’t have to do any additional work to recruit advertisers.
How Do You Get Paid:
Every time one of your visitors clicks on an ad and goes to the sponsor’s site, you get a share of the money that Google receives for that action. The formula by which that is determined is one of Google’s many secrets, however it is typically between 30% and 50% of the revenue generated.
The amount that Google charges the advertiser for the click varies depending upon the level of competition for the keyword or key phrase. For example, a key phrase related to some forms of insurance may generate $10 for you, while one dealing with a charm for a bracelet might net you $0.10.
Does that mean you should select a niche with only high paying keywords? Not necessarily. Remember the amount depends upon the level of competition. You might be able to generate 200 clicks relating to charms for every one click pertaining to insurance, because of the pages competing with yours for the available traffic. In that example, your charm page would give you $20 in revenue, while the insurance page would yield only $10.
There are a lot of nuances to maximizing profits from contextual (or other advertising) web sites. We’ll explain those elsewhere.