Greg Sterling has provided an excellent summary of local search volume and profitability by analyzing ComScore’s December data:

comScore basically defines “local search” as Internet yellow pages, the queries on the local products of search engines (e.g., Yahoo! Local) and searches on general engines with geographic modifiers (e.g., “Denver Attorneys”). comScore (7/06) estimated local search to be 13% of overall Internet search volumes….. it would mean that on an industry wide basis “local search” is today hypothetically worth just over $104 million per month or in excess of $1.2 billion per year….The local ad market (all media) is worth roughly $100 billion….So one would reasonably expect many billions in SMB and other locally targeted ad buying will flow online,

But Greg points out: But in search in order to capture more of these local dollars there need to be more local searches or those with “local intent” need to be better monetized….But, fundamentally, if you’re Google, Yahoo! or MSFT and want to get more local money into search, you have to build more inventory: local searches.

Ultimately despite all of the startups in local and all of the talk of delivery of ads on cell phones, the local search market won’t really take off until there are more searches by real people. Certainly the current crop of portable devices dosn’t make that easy and Yahoo and Google actively hide their local data on-line.

Perhaps the iPhone,or something like it, will allow this significant hurdle to be overcome by both making local searching easier and not requiring every website to reformat their output. Another strategy might be that if you can’t get people to come to the mountain you move the mountain to them…with a Google Kiosk in every mall. (Now that’s local search.)

For now, Local is a niche within a niche and it will remain so for a while. In some ways though, this is not such a bad thing (other than hundreds of startups going out of business), in that much of the data and the interfaces are not quite ready for prime time…when they are they will be adopted and used and the revenue opportunities will be evident.