DMA targeting is the most common form of very local advertising. Zip code targeting can be problematic as not every IP address is mapped to a zip code number. However, most devices can be mapped to a DMA (designated market area).
DMA targeting is common for TV advertisers using cable TV marketing. There are 210 DMAs in the United States. See the following link for a interactive map:
Also see the attached Excel for a list of DMAs by state.