Money is tight in the VC community for local startups, with the dollar outlay down by 30-40 percent, and money raised just a third of what was raised in 2008, per research by Canaan Partners. There is also expected to be a sharp consolidation among sites that have received funding. But three top VCs speaking on the “Money Panel” at ILM:09 cited excellent opportunities in specific sectors of the local ecosystem, including retail, promotions, video and content aggregation.

The challenge is meeting a VC’s standard for advertiser and user volume – always a problem with heavily fragmented local services. Comcast Interactive Capital’s Michael Yang noted that he can’t seriously consider anything with less than one million unique visitors per month. Barring that, “We’re more apt to sit back and see if you can break through the ceiling,” said Yang, who formerly ran marketplaces for Yahoo. Still, Comcast is studying the market closely, especially “commerce and marketplace solutions, as opposed to pure directory plays.”

Patricia Nakache of Trinity Ventures echoed Yang’s interest in commerce and marketplace plays. She noted that most of the attention in local has previously been on Yellow Pages-oriented considered purchase. “What online hasn’t cracked yet is the impulse purchase,” which she calls “the new frontier.”

Citing as a prime example Groupon, a collective coupon site that just received $32 million in funding, Nakache said lessons from retail sites are soon going to be widely applied to local promotions and local advertising. She also sees opportunities in verticals and classifieds. The broad appeal of broad sites such as Craigslist will be complemented by verticals such as Care.com in the healthcare field. “There is an opportunity for a more curated experience,” she said.

Canaan Partners’ Warren Lee also looked for opportunities with verticals, especially in retail. “In the same way that ad networks evolved and became more vertical, we’re seeing similar things on the retail side. Broad sites like eBay will give way (or verticalize themselves) to more narrowly tailored sites, “especially as people become more capable of merchandizing things online,” and boost their “sophistication in marketing and attracting consumers.”

Lee says it all comes down to scaling audiences and expenses. He finds aggregated content especially compelling for this reason. Sites such as Associated Content, Demand Media and Examiner.com, for instance, have really brought out the long tail thanks to the “power of search.” Associated Content’s articles from 2005 made more money in 2008 than they did when they were first written, he noted.”It is a sustainable, highly scaleable model.”

How about that fourth screen? This growing media sector is projected to grow at an annual CAGR of 13.5 percent through 2013 with a total category take of $3.7 billion. But, trying to define what DOOH is and how to make it an effective part of any advertising campaign is still a work in progress. …

Mapping has become less about radius of where you are and more about what people define as local, how far people are willing to travel and the importance of certain events or locations in their community. While the advertising paradigm has focused on ZIP codes/postal codes, consumers identify more with neighborhoods or specific areas of …

Neil Budde of DailyMe and Mike Orren of Pegasus News helped the ILM:09 audience understand what it takes to offer a truly customized news offering that is engaging and relevant.
One of the key takeaways both Orren and Budde discussed was the idea that not everything can or should be customized on the news site. …

Aaron Finn of AdReady and Michael Barr of iPromote discussed the opportunity to serve advertisers interested in display advertising particularly in the self-serve environment. Finn noted that there are roughly 1.4 million businesses participating in search whereas there are only 44,000 businesses participating in display. He believes that there is scale for display and that …

Kicking off this afternoon’s Mobile SuperForum, BIA/Kelsey analyst Mike Boland walked through a number of key trends he sees affecting the development of mobile local search. These include rapid hardware improvement, the increasing local focus of mobile, the growing appreciate of mobile as its own form factor, and not just a mini-extension of the Web, …

Andy Sims of Skype shed some light on its new partnership with European Directories in which European Directories sells advertisers in its seven European countries a subscriptions package to deliver calls to that advertiser. Anywhere the advertiser’s phone number shows up on the Web it will be highlighted in blue and will indicate that by …

Chris LaSala, director, SMB reseller partnerships, Google, updated the audience at ILM:09 on how Google’s approach to local monetization is evolving.
LaSala walked through a number of new or recent product innovations that raised the ante in Google’s effort to make local advertising easy and effective for SMBs.
Here is some of what he shared:
Favorite Places. This …

BIA/Kelsey has been promoting the development of reputation management for some time now and sees this area as defining the local space in the next three years. On a panel this morning BIA/Kelsey analyst Matt Booth hosted a discussion that included three players in the reputation management space: Matthew Berk of Marchex, Ben Smith of …