When geo-targeting search ads, Google and MSN allow you to specify a search radius. How far out should you expand that radius? Well according to a representative from Google, AdWordsPro.Steph, you should not go smaller that a 20 – 30 mile radius. This should be done so your radius is not so small that it results in inadvertant exclusion.

Here is an excerpt from Steph’s actual post in the Google Group discussion.

Typically, you shouldn’t go smaller than 20 or 30 miles around, since if your radius is too small, it’s likely you’ll miss traffic from people that are actually in your target area. You might also consider how local your business is (will people be willing to travel X distance?) and think about the trade-off between expanding the area to capture more false positives or shrinking the area and risk not reaching people that you actually want to because of their IP. If you’re in a rural area, you might want to consider including the nearest metropolis if you know that IPs in your area are identified as a particular city or region.