College students are a rich market for local businesses in college towns. Indeed, advertising has become more important to local SMBs as colleges increasingly compete for the business and try to keep students (and their money) on campus.

CampusLive, the brainchild of UMass Amherst students in 2008, is positioning itself to serve as a media magnet for college students, and as a platform for both localized national advertising and local SMB advertising. The 11 FTE, Boston-based service, which now covers 225 schools, marries social media, RSS’d campus news, games and commerce – mostly restaurant menus and takeout orders.

Key to the service is its system of 400 Campus Reps, who keep the social media conversation live and local, and help facilitate a “crowd-sourcing” concept that keeps the information flowing. In exchange, the reps get points that can add up to gift cards. So far, the company has handed out $15,000 in gift cards, based on a model of 25 cents per submitted message.

In addition to the Campus Rep activity and crowd sourcing of information such as menus, CampusLive provides advertisers with access to a customized WordPress blog where they can provide updates to offers, place advertising and manage contests, where they are assessed charges on a per-student basis.

Peter Pan Bus Lines, a regional player that serves many Northeast colleges, for instance, has developed a challenge game where users can earn a Foursquare-like badge, and compete for one of two grand prizes – a party bus for 20 or a flight to Manhattan on the corporate jet. Other advertisers include college student-hungry marketers such as The Marine Corps, Domino’s, and Buffalo Wild Wings. Advertising fees have ranged from $8,000 to $50,000.

Cofounder and CEO Boris Revsin, 24, says the company is focusing on developing the technology and marketing for the site — mostly with an eye on widgetizing on top of social sites such as Facebook. While it has three internal sales reps, it mostly relies on outsourcing for sales and content. MediaMate, for instance, handles national advertising. At the same time, the company is working with Local.com for local news and directory services.