Can you target local search when you're not even in the state? That seems a littld odd.
When I've experimented with making an ad for local search it asks for the business address and shows that address on a map. The ads I'm seeing also show one from a web portal that obviously doesn't have a real store.
Anyone can target a geography, regardless of their location or even having a physical business.
It sounds like this is being confused with the local business ads [webmasterworld.com]. Those ads can only be targeted to a physical business address.
Google also has a flash presentation [services.google.com] about local targeting.
I've looked at the states/regions/metropolitan areas section and see that they have pretty much all of the majors listed. If I were to pick all of them I assume that would cover most of the people in the US right?
However, if someone from a small town outside of one of these metro areas made a search, would my ad show or not?
But my home connection sees California ads.
One example of dozens of cases I've confirmed.
[california mortgage] (and variations) gets more impressions than geotargeting [mortgage] to California. That should give you an accurate picture of the state of the system.