Local product data provider Krillion announced a deal today that will distribute product ads and inventory content across Topix‘s hyperlocal news network.

This will take the form of a geographically targeted “local best deals” section on many Topix pages. As Krillion’s data drills down to product feeds at individual store locations, these listings will promote in-stock merchandise at the closest stores. Geotargeting will happen based on the ZIP-code level segmentation that Topix employs, and ads will be contextually targeted as well.

“We’ve started by targeting ads in the technology section for each location,” Krillion CEO Joel Toledano told me today. “We want to target consumer electronics in certain categories where it is relevant content for users. In other categories we are going to place ads where they work best and we’ll do some a/b testing.”

Stepping back, this rounds out Krillion’s distribution strategy. At one end of the purchase funnel, it works with companies like Consumer Reports where the search parameters are location and product (involving specific intent and high conversions). Moving up the funnel, it works with directories such as Yellowpages.com, where it’s more of a browse use case with the parameters of location and retailer.

The Topix deal lands Krillion even higher up the funnel, says Toledano, where the parameter is primarily location. This involves Topix readers coming across product ads that are geographically relevant to their location. Because of the offline purchasing tendencies of consumer electronics and appliances (Krillion’s sweet spot), Toledano maintains that this localization causes ads to be more relevant to Topix readers.

“We fit well together,” says Toledano. “We have an index of products carried across U.S. cities and towns. This makes sense for Topix users reading articles about those areas. It’s bound to be more relevant than a random Netflix ad or University of Phoenix banner.”

The deal opens up this new form of advertising for Krillion with similar high-traffic content networks that are geographically segmented. This type of distribution nearer to the top of the funnel will represent a new area of growth, says Toledano, and we can expect to see more deals like it.

Krillion’s Localization Engine covers 40,000 U.S. retail locations including Home Depot, Sears, Target and Wal-Mart. Topix’s network covers 40,000 U.S. ZIP codes and claims 16 million unique visitors. The arrangement will involve a rev share between the two companies.