Theres no question: These things make great demoware.
What the companies are building are geographical user interfaces that display database information on top of local maps and aerial photography. It probably overdoes it to call them geographic information systems, but they are cut from that cloth. Maybe these services will become a poor persons GIS as more information is poured into the database and they gain functionality.
But making local search useful in real life—by people who actually live in the "local" area—is likely to prove much more difficult than building the demos or even creating the geographic user interfaces necessary to drive the services.
Heres a problem I posed to the Microsoft folks showing me their Virtual Earth demo. They had already shown how I could ask the service to find a steakhouse near a downtown Seattle hotel. They then dragged the map to another location—I guess I changed hotels—and it magically updated the restaurant list for the new location.
Lets forget for a moment that the first generation of the MSN virtual planet doesnt know about things like one-way streets, so its probably good I left downtown Seattle. But what the service also doesnt know, and probably wont for many years, are the answers to more complex questions.
For example: Ive just arrived at my hotel. Its 10 p.m., and I want to know about all the restaurants that are within walking distance of my hotel that are still open so I can have a late meal.
Now there are already plenty of databases of restaurants available online. But have you used one lately? I am not sure anyone does, usually because they are significantly out of date and not very encyclopedic. I have never seen one that allows such a time-of-day search, and I wonder if hours of operation are even a part of these databases.
So I do what everyone else does: Rather than go online for half-baked and half-useful information, I call downstairs and ask the concierge or doorman where to eat. And even if Microsofts Virtual Earth were up-and-running right now, thats still what Id most likely do.