I was following up the recent decision about Gator and WhenU pointing out that online pop-up ads do not violate trademark laws. What I found is a nice research from Ben Edelman. He has tried to uncover the 'secret system' that determines how the ads get customized.

According to Gator, its method of displaying advertisements is more effective than others'. Gator says it offers advertisers a clickthrough rate of more than 10%, purportedly more than 35 times higher than average web sites. Gator attributes this success to "deliver[ing] special offers precisely related to the users' interest at the time they are making purchasing decisions or shopping for relevant goods and services."

Ads with user customized content have been a major topic in the last years. Clearly content-based ads (such as my new Google delights) and audience management, that also incorporates data about site, users as well as rightly used spyware are leading to a better advertising. More context means less flashy banners and many more clicks. This is surely one of the reasons, why so many magazines like Business 2.0 or Fortune have switched to a paid and personalized subscription model.
Edelman has partly reengineered the process how Gator finds out, which ads to show. Here is one example for imdb.com. Quite an interesting read.