Interest and category targeting have been around for a while now in AdWords. I've had an idea on how they can be usefully combined which I will share in this post.
As a user browses sites that run AdSense Google is able to build up a picture of what that user is interested in. Google then groups these users into categories and allows advertisers to target them in AdWords using interest targeting.
Interest targeting aims to target users (below I will talk about how this is not actually the case) but category targeting works at the page level; Google figures out into which categories a page fits and then allows advertisers to target these categories.
I find both of these targeting methods to be generally less effective (when measured in terms of direct response) than the keyword based contextual targeting.
However it is easier to establish a much wider reach using these targeting methods and there is a lot of cheap inventory so it is possible to get lower CPCs. However, be at least slightly wary of the quality of these sites; a colleague of mine once put it rather well:
There is a physical limit to the number of these sites that I can block in a day, but there is no limit to the amount of shit on the internet.
There are interesting possibilities for combining interest and category targeting.
For a not signed in user (I believe there are still some of them around) the user's interests are based on a cookie so it is not the user that is actually being targeted but the browser. Thus if two people share a browser you will end up targeting both of them.
Normally this would be considered a bad thing but let me present to you the following scenario:
You run an online shop selling products for women. However, this product is often bought as a gift so only about 50% of your customers are women. Search advertising works well, but the type of keyword that performs well (very specific queries) are unlikely to be used by men buying gifts because these people don't know the level of detail necessary to make these queries; how can we target them?
One solution is to combine interest targeting with category or contextual targeting.
By picking categories and interests with a small or non existent overlap it is possible to target one user of a browser based on the activities or preferences of another.