I'm basically trying to determine how accurate geo-targeting is ...What percentage of ads are shown to the correct audience. When I use a tool like www.ip2location.com to determine my location, it gets it wrong for three of the four locations I generally connect from. That's 25% inaccurate. Here's the question: Imagine I am a roofer and want to use geo-targeting to reach my audience with AdWords. Unless you are within 20 miles of my business, I don't want you to see my ad. Now imagine my business is located where you are connecting from. If you go to www.ip2location.com and check what it says your city is, is that city close enough to my business (your location) that I would want you to see my ad? Yes? No? Where are you actually vs. where does it say you are?
I'm in Knoxville, but it says I am in Kingston, TN. If I am a Kingston roofer, my ad would be shown to the wrong audience.
Google's geo-targeting tends to be very good, but there's obviously no way to pinpoint each user exactly. If your ad is good & lets users know where you're located, most likely only the users in that location will click.
If you follow that logic all the way out, you would just target nationally and rely on your ad copy to qualify advertisers. That doesn't work for me. There are too many people who click because one word jumped out at them and they didn't bother to read the whole ad. It's either geo-targeting works and I use it, or I don't use it at all.