Though it is still the most effective online tool for targeting users in specific locations, the challenges you should anticipate with geotargeting revolve around pricing, location and granularity.

Pricing: Because of its ability to reduce ad waste, the detail that's gained with geotargeting commands a higher price, but tailoring creative to target specific regions can get costly.

Network Users: Large networks of online users (such as AOL) and large corporations can be difficult to locate with certain accuracy. Out of the 180 million online users, 23 million or so reside within the AOL network. AOL IP addresses route through limited locations, causing AOL users to look as if a majority live in Virginia.

Likewise, if someone works for a big corporation with headquarters in Texas, when that person logs in from their home location in another state, they will look like they're coming from Texas because the corporate server routes all employee online activity through a central location.

Granularity: At each level of granularity the percentage of accuracy drops in a geotargeted campaign. Accuracy levels of granularity typically look like this:

Some waste occurs, but it's typically minimal in comparison to the benefits that geotargeting offers.