I came across a rather interesting discovery while doing some research for one of my small business clients today: it seems to take only one Local advertiser (different from a standard Web Search advertiser) to trigger an entirely new set of PPC results in Google Local.

The easiest explanation is probably by example -- consider the difference between the following searches:

dog sitters walnut creek ca vs. dog sitters san jose ca  

When one types in a search term with a geographic qualifier to Google web search (like 'Dog Sitters Walnut Creek CA'), Local results often appear above the organic listings, as has been documented in recent months by Bill Slawski, Matt McGee, and  Blumenthals. The PPC ads shown on the top and right-hand sides of the pages are your basic run-of-the-mill Adwords text ads. 

"Web Search" Results for 'Dog Sitters Walnut Creek CA': 

For this particular query, Local search (found by clicking on the Maps tab in the Google Utility bar or the bold link that says "Local Business Results for...") looks largely similar.  The same advertisers that were on the OneBox results page show up in the same positions on the Local page.

"Local" Results for 'Dog Sitters Walnut Creek CA':

Not too fascinating, I know.  But look what happens when we try a similar search in a larger metro area (San Jose), with a slightly more web-savvy set of small businesses.

"Web Search" Results for 'Dog Sitters San Jose CA':

Now look at the Local Results page for the same query--only ONE advertiser! 

"Local" Results for 'Dog Sitters San Jose CA': 

What seems to be happening is this: Google's Adwords algorithm is set up to show 'Web Search' ads on 'Local' search results pages by default.  But if there's even ONE advertiser who has made the effort to create a 'Local' ad, ONLY the 'Local' advertiser inventory is shown, without filling in the rest of the space with the default 'Web Search' ads. 

Google Local is obviously in relative infancy, and it's doubtful that Google will pass up the opportunity to show a hybrid set of ads in the future.  We'll surely be seeing more and more Local advertisers going forward as well.  But as Local results gain more prominence in OneBox results, and users become more comfortable with them, this far less competitive environment seems like a great opportunity for small business clients who don't have the budget to spend a ton of money on normal PPC.

I would encourage small business marketers to take the time to create 'Local' ads in addition to (or even instead of) traditional 'Web Search' text ads -- not only do you get to upload a cool little custom icon for your business, but there's a decent chance your site will completely dominate the right-hand side of Local results.