picture-17.pngGrayboxx is a secretive Saratoga, Calif. startup that plans to launch later this year to help you search for popular local businesses, from restaurants or dry cleaners.

We’d normally yawn at such a company, because a dozen other companies are more or less directly competing in the area. But we got a sneak peak, and we were impressed with its very different way of collecting data to determine business popularity. The data includes where people make purchases and what businesses they recommend to each other. (Apologies for being vague, but the company is keeping its exact method under wraps. )

What Grayboxx does show is that there’s a lot of innovation left to uncover in search. Unlike Yelp, Yahoo Local, Google and other local review sites (including Google’s new local initiative), Grayboxx relies on its own data (again, confidential for now) instead of using page rank or relying on local user generated content. In a demo provided to us by founder Bob Chandra, we tested Grayboxx with random searches based on our local knowledge of which stores in Palo Alto were good or not.

When somebody searches for, say, Asian fusion restaurants in Palo Alto — of which there are many — Grayboxx points to the businesses its data suggests are the most popular. The results were on point for Palo Alto businesses — Tamarine for Asian fusion food, for example. Grayboxx also helped us find a new dry cleaners.

The market for local information online is wide open. For example, people still prefer newspapers to local search engines for getting local shopping information, according to the Kelsey Group last year.

As SearchEngineLand points out, nobody can even agree on the size of the local online advertising market in the next five years: Research groups are estimating anywhere from $5 billion to $30 billion in the US. What these researchers do agree on is strong overall growth in the market — with no clear winners as of yet.

Rajeev Motwani, a Stanford computer science professor who advised the Google founders while they were still students, has joined the company’s board, along with a number of other search, data-collection and local advertising veterans.

Grayboxx has received an undisclosed amount of funding from Sierra Ventures.