I believe that the future of contextual advertising is dead. With more people cherry picking conent from various sources (ie. RSS feeds) and creating their own online space to watch/consume this info (i.e MySpace) the only long term way to reach people online is via behavioural targeting.

It's about cost-effectiveness and the ability for big brands to reach the audience it wants in sufficient numbers. Before behavioural targeting the only way to reach an online audience of say, potential family car buyers, was to advertise on a site that might attract that kind of audience (contextual advertising). Unfortunately there can be a lot of waste: is it a man doing the buying? Try a golf site - but there may be a lot of singe guys on this and few women. So try a female site as well - similar problem. How about a family site? Most users are female. So how about a car site - well start saving now and book for Christmas! Even then, they may just be online tyre-kickers.

Behavioural targeting allows advertisers to target web users who have looked at car sites or pages, have also been to a family site and may have looked at specific car brand web sites - and even read specific reviews or requested a brochure. They are in the market for a family car and they are stored anonymously in the database. Now the family car brand advertiser can instantly put their ad in front of this user wherever they go within the Behavioural Targeting company’s site network.

In short, better targeting, less waste and - with a large network of sites - the reach that brand advertisers need. Not all behavioural targeting companies can do all this though, so it is worth asking about the reach for your audience segment, whether a database is involved and what sort of sites the ad might appear on.

I don't think many advertisers would agree with you there Pallavi. Let's be clear here, behavioural targeting is aiming ads at people not pages. The people who see the ad (it is served specifically to them) have been identified as either being a precise market segment that the advertiser wants to reach, or who have shown an express interest in the brand or product. The ad can be served to them anywhere (provided it is in the BT company's network) - the content of the page where the ad appears is irrelevant.

Just relying on gut instinct and taking an educated guess "placing a banner on a site which one feels (my italics) has the right content to attract a visitor"  is an incredibly inefficient and wasteful way of deciding where to advertise these days. One of the real benefits of Behavioural targeting is that you know that your ad is being seen by the right audience. OK, it may not be 100% accurate - perhaps the woman who had visited the car reviews page, then visited the Mothercare site, then requested a brochure about an MPV isn't looking to buy a family car, but it's a lot more likely than slapping an ad on a premium car site (at huge expense) and hoping that everyone who sees it is A. relevant and B. in the market

Phew, glad we're in agreement there then. It seems obvious to me that someone who has actively shown an interest in a specific brand or product (as shown by their online behaviour) is a much better prospect then someone who is assumed to be in the market just because they have visited one site.

Factor in that ads relevant to individuals but seen out of context stand out more and have greater recall and get better response and you can see why Behavioural Targeting is getting everyone so excited.