mack - 11:23 am on Jun 24, 2013 (gmt 0)
I own and run such a directory, one of my goals lately has been to put the user first and forget about Google. In terms of traffic we do very well, but in all honesty the only google centric seo that has been carried out was the creation of a g sitemap.
There are lots of scripts out there that allow you to run a business style directory, I would invest the time or money into either developing, or having a custom platform developed. By doing this you have software that does exactly what you need.
I offer free listings and always will, its the volume that makes a directory useful. A fee to list is like a barrier to entry, and will result in a lower quality directory.
There are many ways users interact with directories. Try and cover all these bases so your directory is where your user needs it. Mobile apps, website, kindle etc etc.
There certainly is space for local directories, but they need to offer something worth while, and focus on the user.