Targeting is an extremely powerful matching system. It is what allows Google Adwords to make such an easy and turn key system for displaying your ads in front of targeted audiences. When you ad matches with a keyword search or relevant content on a website, you ad has the chance to be displayed. This gives you the greatest chance for influencing the user and getting them to click onto your website (qualified traffic).
Search targeting refers to advertisements which have been optimized for certain keywords and are shown on Google‟s search results page. These ads are highly relevant to the user‟s search query and are therefore matched and appear on the right side of the search results page. If your ad‟s keywords match those of the search query then your ad could appear. This results in a highly tailored product to person match that helps users find quality services while advertisers find a niche market online.
You can modify how your ad is matched by using features like broad matching (matching with different combinations of your keywords), geotargeting (regional specific) and negative keywords (those you do not wish to be matched with).
When ads are paired up with keywords on websites within the content network, contextual targeting is used. Google has an advanced system that looks at the content and overall theme of each website. Things like text, language, link structure, and page structure all factor in when creating a relevant match between an ad and keywords on a website.
You have the ability to make changes to your ad for contextual targeting purposes. Just use the site exclusion function to list competitors or low conversion rate sites or any other sites you do not wish your ad to display on.
Also try combining keyword targeting and placement targeting in the same ad group to define specific websites on which you want to display your ads.