There is an interesting proposition on the Engine Ready Newsletter about a Google AdWords strategy called Operation Camouflage that involves advertisers to geotarget their ads away from their competitors so that their competitors believe that they have stopped advertising (and thus, the competition will no longer consider you as a threat). The premise is that in competitive research, advertisers click often at the top sponsored results to see how they compare. By targeting your ads so that they do not display by the headquarters of the competition, that problem of invalid clicks would be eliminated.
But NewKidOnTheBlock over at Search Engine Watch Forums is dissatisfied with removing the ads altogether. If the problem is that advertisers are clicking on the top sponsored results, why not strategically place yourself lower?
But EngineReady writes in and responds to this notion, saying that if the ad is too low, it may be disabled on its own because of poor ad quality.
The thinking was if the ad never gets impressions, or a zero CTR, it might end up being automatically disabled for non-performance, exposing the regional or national ads it is supposed to cover-up. That means an additional step of having to check up on the ad frequently or potentially being exposed sooner than you hoped.
On the other side of the coin, if you're advertising in a dense commercial district, you need to be quite careful.
Also, if competitors are in major cities, like NY or Chicago, a radius of just one mile can rule out a dense business district, so we may need that exposure, as you eluded to. You can tweak this strategy to best fit the situation.
In any event, it's a pretty good and thought-provoking strategy. And it makes sense too.
Forum discussion continues at Search Engine Watch Forums.