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I found that allocated IP ranges were poorly set up for geolocation to begin with in many instances (e.g. ISP or telco usting their data rather than clients, or large ranges not being properly reported/divided amongst geographically distinct nodes).
I believe that there will be better geo tools provided by someone like Google before IPs get sorted properly.
Our sites see at least one visit from around 25% of UK users per year, but that is not enough to extrapolate meaningful information (even given that people are doing local searches - there are numerous issues that are not priority 1 for us).
The things that you need to worry about include:
Has the ISP properly reported IP ranges...
If they have, have they allocated the user the correct IP range?
Is the person on a mobile device? (which we will assume you do not have permission to triangulate)
Is the user in the place that they want information for?
Is the person using a service which changes their apparent IP, or is this happeing without them knowing?
How granular (& confident) do you need to be?
It's a nightmare, but it may be that databases which are out there that do a good enough job for given circumstances - everyone will have to decide what they are willing to put up with and the build their site with those limitations in mind (possibly making it obvious how to change the locality etc).
When I visit sites I often see adverts for Glasgow (I live in Edinburgh) or other random places - only occasionally do I see the correct location (giving it the leeway of within the county of Midlothian).
I'm on a BT consumer broadband connection, which is what many people in the UK will be using (people on company networks should, on average, see better results as there's more chance they will be in a properly geographically defined IP range).
I'm sorry that I can't shed any further light on what the best solution is - we've relied on driving visitors to pages that target given places, so we then show ads for that city/county/region/country based on the business category.
I think that one of the major advertising networks will figure this one out,but until then we're going to have to experiment.