The market for local services has traditionally been owned by the phone companies who used phone numbers as the key for Yellow Pages listings, however, Yellow Pages publishers have been lazy and arrogant and are just realizing that they could be crushed by the likes of Google, since the majority of revenues will soon come from online advertising. Traditional publishers' online Yellow Pages are usually very poorly executed, for example, Dex only introduced searchable listings (instead of browsing a directory) at the beginning of this year.
The model for online local services is probably Citysearch who offer paid listings alongside the directory and include value added content such as ratings. Craigslist should be in there but the lack of focus means that the biggest services advertised have gravitated to the seedy or low cost end of the market.
Although Yahoo has had a local services tab for a while, it hasn't linked this to pay-per-performance advertising, however, an Overture service is in the works. In addition, Google will surely ditch their increasingly defunct DMOZ powered 'directory' tab for the Yellow Pages service at Google labs. For Google, Yellow pages may have an added bonus - since local services require a search term plus some information about yourself, such as location, storing this information in a profile benefits users and helps build in a 'switching cost' to lock in users. Perhaps this is the kind of profiling service they should morph Orkut into.
There may be an opportunity for weblog publishing tools to package a product geared to small business websites. In order for PPC (Pay Per Click) local services ads to work, they must click through to a webpage about the service, but most of the 100M local businesses in the US do not yet have a website.
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