Interestingly, this topic comes up fairly frequently on HN. Any time an article mentions local web presence, the conversation shifts to how much local business websites suck. It appears that OwnLocal has set their sights on this market.

> How saturated is this market?

There are plenty of local development shops, but the quality and value varies greatly. On one end, you've got your "brother's, cousin's, best friend" who designs websites on weekends using FrontPage 2003. On the other end, you've got seasoned web developers who would prefer to focus on larger, national clients, because local clients don't have the budget to do a web presence correctly. In order to sell to this market, you need a refined "product", not ad hoc development. So from that perspective, I'd say the market is not terribly saturated. It depends on how broadly you define the market.

> Is there room for more?

In my view, yes, absolutely.

>Are there niches?

Every category of small business has its own set of needs. Professional services (attorneys and accountants), food and dining, healthcare professionals, auto repair... name a service, and you could consider it a niche.