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Yahoo!'s Local Notion

I remember when the Web was anonymous. You could just spelunk where you wanted to, roaming the cyberspace streets without a care in the world. Better look over your shoulder, because that's all changing.

First, Google decided it wanted to get to know us a little better in March. This morning, Yahoo!'s (Nasdaq: YHOO  ) Overture advertising unit decided it wants a hug. Specifically, Overture has decided to serve ads from businesses within a half-mile of where you live. Called Local Match, the service appears akin to dialing 411 on your phone to get ads.

Clients don't need a website to use Local Match. Instead, smaller advertisers register with Overture and have their information posted on separate Web pages. Local Match pushes appropriate profiles when a user's search criteria and location merit it. For example, a restaurant in San Francisco's Chinatown might buy a Local Match profile for its area. Registered users nearby would then see a link to the restaurant's profile when looking online for a place to eat.

Is this all a little Orwellian? Yeah, maybe. But it's big business, too. Differing estimates show that online classifieds pulled in $500 million to $1 billion in revenue last year. Researcher The Kelsey Group says the market for online local search could grow to $2.5 billion by 2008, depending on how well Yahoo! and Google fare in their forays. It looks good so far. In addition to Yahoo!, Local Match will be made available through Microsoft's (Nasdaq: MSFT  ) MSN, Disney's (NYSE: DIS  ), and InfoSpace's (Nasdaq: INSP  )

Competitor Google Local isn't much different than the Overture offering, but Yahoo! officials insist that connecting online with businesses as little as a half-mile away is a significant advantage. (Google Local only gets within 20 miles.) Maybe, or maybe it's the marketing equivalent of splitting hairs.

Either way, the numbers suggest the competing services will offer substantial value. A study from Verizon (NYSE: VZ  ) from 2002 says that 63% of small businesses lack websites. And in published reports, it has been estimated that 11.5 million of 23 million small to midsize U.S. businesses don't have a site of their own. Indeed, this local notion appears to have national appeal.

What's your take? Are you a little worried about your computer keeping tabs on you? Is local search the next killer business breakthrough for Yahoo! and Google? Discuss all this and more at the Yahoo! discussion board.

Fool contributor Tim Beyers could swear his computer is stalking him. He owns no shares in any of the companies mentioned in this story, and you can view his Fool profile here.

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