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They are buying "national" keywords, which are inherently local. You can not reproduce the buying with geographic qualifiers.
This is a user conditioning strategy to drill down on intent and spur local adoption.
I haven’t been able to find placement of the local.google.com adwords ad for other general searches that would typically be refined to the local level (e.g. search on “plumber”, “personal trainer”, “Chinese food”). Right now I just see “restaurant” or “pizza” pulling in the ad. Does anyone see others?
I wonder if they opted into Adsense? Actually, let me rephrase, I wonder if they did not opt out of Adsense? :)
This would be another reason for G to use the Adwords distribution; cheap distribution across their very substantial Adsense network promoting the local product. They are at the whim of their algo, but there still will be distribution for their product. We all know how G feels about spending money on marketing - what with their extravagant Superbowl commercials *tongue in cheek*.
Y is pushing their Local product in the traditional marketing outlets (who knows what they paid for The Apprentice spot). I wonder when G will break down and start spending some serious marketing dollars in attempt to lock their hold.