The answer, in a nutshell, is video, mobile and reviews. The following is an overview and some resources to learn more, and I’ll add to this today as more information comes in during the ILM:07 conference.

Mobile
“2008 will be the year of mobile,” according to The Kelsey Group. They are predicting mobile will become the next big search product, with sales forces pushing local advertisers in this direction. That's already happening -- mobile services in the local search area include ad-supported directory assistance, browser-style searching on mobile devices, and text or SMS-response search. Examples of mobile search worth a peek include Yahoo OneSearch and services from several newspapers (examples: The Arizona Republic, Palm Beach Post).  Some companies are even doing mobile video, especially in the real estate vertical.

A lot of mobile search services are incorporating maps, and Wednesday's Google announcement is an interesting move in this direction. Other major developments in mobile (from portals, actually) Google launched AdWords for mobile earlier this year, and AOL launched Mobile Search. There are many non-portal mobile search services in existence that should not be ignored, either, such as Loki.com.

In addition, companies like AT&T are moving into selling local search assistance to small businesses, focusing on directory assistance for mobile, creating even more competition for small business advertising.

Wednesday, the Yellow Pages Association announced it has added a mobile-specific section to its useful Local Search Guide, a directory of Internet Yellow Pages, search engines, search tools, vertical directories and (now) mobile tools. The Local Search Guide is available at www.localsearchguide.org/.

Several people at the ILM:07 conference are saying mobile local search (or "mo-lo") will really take off in 2008. Some challenges the area has faced up to this point inclue slow network speeds, small screens and the slow adoption of GPS-enabled mobile devices. Those problems are all dissolving as the technology advances.

Additional reading on mobile:
A Step Forward for Mobile Local Search (Search Engine Watch)
The Parallel Universe of Local Search (MediaPost)
All Aboard: Mobile Devices Add New Ways to Reach Readers (PRESSTIME Magazine)

Portals
“Just when you think you’ve refreshed it, it’s out of date,” said CitySearch President Jay Herratti this afternoon, citing the most difficult challenge for all local search – keeping up to date.

Herratti told attendees the number of competitors in the local search space has grown hugely – search engines, social media and community sites, online directories and city guides are all competing for the same information. Citysearch is part of a newly expanded IAC/InterActive Corp that includes multiple search-related brands. 

To compete, portals are offering more and more robust microsites for small and local businesses, and heavily promoting the customer review feature on those pages. Profile pages for businesses often include basic information plus coupons, maps, etc. Some portals are offering video commercials or photo gallery capabilities, as well.

Many small businesses are opting to include customer reviews on their profile pages -- a "significant influence" on purchases, comScore reported at the ILM:07 conference Thursday morning. comScore's Brian Jurutka said people see reviews as unbiased, third-party information that are efficient. a comScore study earlier this year found people also find reviews provide potential customers with information they might not have thought to research on their own. In addition, potential customers reported they value peer-reviews (user-generated) more than professional reviews. Jurutka said this morning comScore research revealed 24 percent of people who shop on the Web look at customer reviews. (See more on the effectiveness and importance of customer reviews from ForeSee via DestinationCRM.com.)

One of the best ways to figure out what the portals are doing – outside of flat-out asking them – is by going to the Web sites and simply searching for things on the local level. The YPA Local Search Guide is a helpful place to start. 

Additional reading on portals and search:
8 Things the Search Industry can Teach Small Businesses (SmallBusinessEM.com)

IYPs
As search engines index more pages (and search becomes more effective), consumers are using portal searches like Google or Yahoo more often to find local information. This trend means “usage per user session” of Internet Yellow Pages (IYPs) is going down – Web users are searching for “plumber + zip code” through Google instead of going to the yellow pages Web site.

However, YP sales channels are still largely controlling local business advertising sales and remain very effective sales organizations, according to The Kelsey Group. It seems that yellow pages sales channels have the most existing local accounts, but not front door Internet traffic. IYPs are working on changing that through cross-platform access points and mergers such as mobile.

YellowPages.com this morning announced the addition of two new video services for advertisers. One product allows advertisers to work with a third party video company to produce a professional commercial, the other allows advertisers to create a photo-audio slideshow ad.  In October, the company announced new mobile search capabilities.

In addition to YellowPages.com, DexKnows.com, owned by R.H. Donnelly, is certainly worth a look. (Note: Jake Winebaum of R.H. Donnelly's interactive division presentd at this week's ILM:07.)  DexKnows.com includes features like itinerary and route mapping for consumers, side-by-side comparisons and searching by landmark. (Jake Winebaum, President of Business.com – also owned by RHDi, the interactive division of R.H. Donnelly – presented at the Kelsey conference today.)

Additional reading on IYPs:
IYP Growth Rate to Surpass Local Search Through 2011 (ClickZ)
Do Yellow Pages Still Matter? (Screenwerk) 

Newspapers
For information on what newspapers are doing, see the 2007 report (written by Peter Krasilovsky, now of The Kelsey Group) “The Newspaper Online Shopping Report.” Also, be sure to check out some of the newer newspaper-based local guides, such as the Lawrence Journal-World’s Marketplace and the NAA Snapshot from the Edge piece on the Bakersfield Californian’s InsideGuide.

For more examples, see the past Digital Edge Award winners for best local shopping and directory strategy.