Local merchants may want to reconsider: The combination of location-based ads and mobile devices fuel consumer store visits, a separate study by JiWire found. One-fifth of mobile users went to a physical store as a result of seeing a location-based ad, the Mobile Audience Insights Report, released earlier this month, found. Further, 17% spent money because of the ads, the study said.

"Consumer demand for location-based services and reception to location-based advertising continues to increase dramatically, with companies like Groupon, Facebook, and now even Google getting into hyperlocal deals," said David Staas, senior VP of marketing at JiWire, in a statement. "Localized ads help consumers find the best deals and venues in their area and as location-based services become more mainstream, people are becoming more willing to give their location to reap the benefits of relevant promotions and discounts."

Many local businesses typically have limited time and money to invest in marketing. In fact, last year the majority spent less than $2,500 a year marketing their products and services, and 60% do not expect to increase this budget in 2011, the MerchantCircle report found. One-fourth cited high costs as their primary complaint about online marketing, according to the study.

Lack of time was the top challenge for 37% of responding merchants, who were unable to investigate or take advantage of new or unproven online marketing tools or techniques, the poll said.

Instead, many smaller businesses continue to use traditional offline marketing methods -- but their reliance on these tools is declining. In 2010, their use of print advertising dropped to 27% from 40%; Yellow Pages advertising fell to 35% from 45%; and their investment in direct mail campaigns decreased to 28% from 39%, according to MerchantCircle. But 24% of respondents cited coupons or direct mail as one of their top three most effective marketing tactics; 23% cited Yellow Pages as a top tool, and 20% credited print newspaper ads as one of their top three marketing instruments, the study said.

Online marketing companies, which once focused almost exclusively on national brands, now are looking closer at smaller businesses, a move that could eliminate some of the complexity and cost for local merchants. Indeed, 51% of local businesses get at least one online marketing sales call a week; 10% get called almost daily, MerchantCircle found.

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