One of the early promises of the internet was that national marketers would be able to target on a local level with greater precision (not to mention with interactivity featuring sight, sound and motion) than existing offline media such as community newspapers, radio stations, direct mail, telemarketing and, in larger markets, local TV.
The newspaper model of advertising is almost gone due to declining readership and shuttering of daily papers. In mid-July the Ann Arbor News ceased daily publication, though a smaller staffed web site and twice weekly print product will remain. The Seattle Post Intelligencer published their last edition in March. The company, however, said it would maintain seattlepi.com, making it the nation’s largest daily newspaper to shift to an entirely digital news product.
Network and local TV has seen viewership loss to cable, streaming video sites like Hulu.
Radio listeners have also turned to the web and satellite radio.
Direct mail and telemarketing? Good luck with those in this environment. Here is a chart from IAB:

What about local blogs? There are millions of blogs out there, but which ones can deliver results for an advertiser? How do you get a decent audience? Most blog sites have no salespeople to deal with and getting an ad buy can be painfully long process. Amagalmating ad buys across a series of blog sites can be an even bigger pain, but you almost have to do it to get a decent sized audience.
The most reliable way for national marketers to deliver messages into local markets is through local market websites (or the localized content sections of the portals, such as weather). If you think about the local sites in your area, many of them are poorly trafficked blogs or community/municipality sites that give you information about parks, schools and the library. The sites that really get traction are companion sites to local media properties: radio, newspaper (i.e. www.annarbor.com, www.mlive.com, etc.), TV stations.
This, then, is the reason why ad networks that specialize in helping national advertisers target locally have grown up by aggregating numerous local media sites. If you have the ability to sell some inventory for a couple of local TV stations and radio stations and the newspaper, you can deliver an audience that is pretty reliably local.
Publishers realize the problem too. AOL and Citysearch signed local content and advertising pacts in February. Companies like ZEvents are now getting inventory from their local event partners so advertisers can access all of their local brand sites.
If you’re a national or regional marketer, then you’re familiar with the concept of media fragmentation, or the continued splintering of target audiences as they move away from a handful of large media publishers/sites towards many smaller, niche ones. It makes finding and communicating with your audiences a lot harder, as the number of media outlets through which to reach them has grown exponentially. You may want to consider Ad Networks.