Google just released a data heavy analysis on contextual ppc ad performance versus ppc search. There's a lot to look at here but the bottom line is that contextual advertising is just as effective as regular search.

My experience is that contextual is not as good for on-page conversions but if managed properly it can bring in clicks at a lower CPC. After that its all a numbers game. If the clicks are cheap enough you can tolerate a lower converion rate. 

Read it for yourself.

What do you think?