A New Zip Code


But according to analysts, that's changing with the growth of social networking which has made it easy for local businesses to market themselves for free without even building sites.

"When you look at local brands, the uptake of small business on Twitter is big," says Matt Booth, senior vp and program director, Interactive Local Media. "Something like 60 percent of new businesses expect to build a Facebook page. You have the phenomenon of these things being omnipresent, and they're free and have a lot of traffic."

Borrell agrees. "The Internet allows such a great level of targeting," he says. "If you want to reach 18-to-24-year-olds in Duluth, Facebook allows you to do that in a heartbeat, and with your credit card after midnight. You can't do that with a newspaper."

AOL's Patch strategy, besides hyperlocal reporting, also taps self-service advertising. In each market it enters, the company is creating Web pages for nearly every local business and do-it-yourself ad platforms.

However, despite the proliferation of localized content and ad options, perhaps the single biggest driver of the local online medium over the last few years is the smartphone, and the string of apps that followed. Once millions of Americans started carrying around both the Web and a GPS device in their pockets, that opened up huge marketing possibilities and elevated local in the ad industry's conscious.

"I think the iPhone was the tipping point," says Chris Tolles, CEO of the local news aggregator "Two years ago local was not a big topic. You used to hear buyers say, 'I'm buying Chicago, New York, Albuquerque and the Internet.' Now when I walk into [an agency], the kid who uses Foursquare on his iPhone says, 'Yeah, local's important.' I can pitch a local play, and people are listening."

Yet others maintain that local online advertising will always be provincial and not the domain of big media shops in New York.

"Our thesis on local is that it's very large and very fragmented," says Jay Herratti, CEO of Citysearch, which just rolled out CityGrid, an extensive local online ad network that taps into numerous existing local sales nets. "Madison Avenue is only part of the market."