The replacement for newspapers isn’t Craigslist; it’s local social media.

Much has been made of Craigslist rising up to destroy newspapers' classified-listings business, but less has been said about newspapers' own sins in falling behind the needs of their commercial advertisers. For decades, publishers had the luxury of actively disparaging, say, the bra ads that made 10-part Pulitzer Prize reportage possible. But the rise of the Internet, despite taking decades, caught them unprepared. New York University professor and longtime Internet sociologist Clay Shirky recently explained, "When Wal-Mart and the local Maytag dealer ... were all able to use [the Internet] to get out of their old relationship with the publisher, they did. They'd never really signed up to fund the Baghdad bureau anyway."

Yet while the online presentation of news has made tremendous leaps, ingenuity has not carried over to the business side. Online readers see (and ignore) the same lame online display ads they did 10 years ago, just more of them, and bigger. And the most expensive online advertising now actively blocks readers from viewing any content until the ad has fully played. This is progress?

The truth is, there has been progress in monetizing the Internet, beyond the display ads most people ignore. But that progress isn't coming from newspaper companies. It's coming from companies like Yelp. And Yelp is currently eating newspapers' lunch.

Yelp, for the uninitiated, is an online review Web site of local businesses in metropolitan areas around the country. Founded in San Francisco in 2004, it has been aggressively expanding into most major American cities and their suburbs, even setting up a site in London. On the surface, Yelp seems no different than the legion of older local review sites already out there. Tell it where you are and what kind of business—restaurant, bar, spa, nightclub, moving company—you need. The site in turn supplies you with a ranked listing. Once you click on a listing, a batch of short, quirky reviews, complete with star ratings pops up. Cold fusion, it's not.

But Yelp's founders have invented a Web site that cleaves local online advertising from journalism, right when journalism needs it most. Yelp is the evolution and replacement for the actually quite useful local advertising that used to appear in newspapers, only without the pesky journalism breaking up the ad pages. And Yelp is trying to make that separation permanent.

The site's design hammers home that its reviewers are real people, just like you, not shills or trolls. When you read a review that clicks for you, you can follow the reviewer's profile and what other businesses they've written about. You can also see which reviewers they follow, in the manner of Digg or other social-media sites. In short, you can very quickly start to build a trusted network of strangers whose opinions, on things like bagels and beer prices, you value. It's a pretty nifty way of finding a hidden gem of a restaurant or decoding a new neighborhood. And it requires only the faintest sensation of interacting with another human being. Yelp represents an evolution in advertising that newspapers should've been providing to readers and advertisers years ago.