And they just keep plugging away and plugging away at micro-sites. A new Bay Area company, Smalltown, has launched a micro-site service in San Mateo and Burlingame that serves as kind of a commerce-oriented city guide/Yellow Pages. The service has received $3 million in funding from Formative Ventures, a tech-oriented VC.

Micro-sites certainly seem to be “in.” Companies such as Premier Guide and EyeBallFarm are providing micro-sites as template-driven products, alongside a host of search-related services that drive leads to a business.

Smalltown’s service, however, isn’t specifically lead-driven. Instead, its approach is based on the idea that consumers will want to collect easily updateable “Webcards” of businesses in their community, and will regularly return to the Webcard page to see what’s up, and to exchange reviews, comments, etc. They can also email the Webcards to friends or associates.

As Smalltown puts it:

“Neighbors can share their reviews and recommendations, where pay-for-placement advertising is replaced by valuable merchant-generated information, and where all types of local content are integrated into one easy-to-use experience.”

As conceived by Smalltown, the Webcards have a free basic tier, but can be upgraded with photos, text, coupons and video. The latter is seen as especially valuable as videos become easier to produce and post. There is also an opt-in newsletter capability.

The upgraded tier is priced at $40 per month, which is higher than Yahoo Local’s $9.95 tier for enhanced listings. But it is considered a sharp discount to other local advertising channels (Yellow Pages, Penny Savers and coupons).

To sell the ads, the company is hiring dedicated sales agents – one for every 200,000 people. Until it scales up, one sales agent may rep several adjacent communities.

To me, the Webcards have been elegantly designed, are fairly intuitive to fill out, and serve as attractive alternatives to difficult-to-maintain websites or template-driven services. I say as much in a press release distributed by the company. But we’ll see whether SMEs will value the functionality of the cards as virtually standalone products (although the company’s welcome tab will showcase “featured cards” and “events.”)

My take is that lead generation is very much the thing right now, and that the service’s “look at me and come back often” approach is a little out-of-sync with the current marketplace. While the Webcards can be found on search engines, SEO and SEM truly isn’t the emphasis here.

Moreover, I think that Smalltown is going to have some difficulty generating traffic to the cards. Right now, its plan to drive traffic is based on viral, non-advertising techniques (sponsoring ice cream cones at fairs etc.) The economics of relying on local sales agents selling low cost products like this have also proved tough for other local online guides.

Another issue with Smalltown is that it is defining “local” within the city boundaries. Other local business sites are generally oriented around zip and proximity. This may or may not be a mistake. It can certainly be fixed.

Ultimately, Smalltown has developed a nice looking and easy-to-use ap. I look at it and my gut tells me it is nicer than most other local directory sites. It also has a nice URL that probably cost some real money. But my head tells me that to have any measure of success, it is going to have to be paired with sites that have strong media-like traffic….and can promise leads based on search results.