CityGrid Media (formerly Citysearch) will extend its paid base of 800,000 advertisers across thousands of neighborhood news pages, courtesy of a display advertising deal with Outside.in. The two companies have been quietly conducting pilot tests of custom ads in “a couple” of markets, leading to the wider rollout.

Outside.in CEO Mark Josephson tells us that the tests have shown “strong relevancy, and high clickthrough rates and CPM rates.” Josephson says that CityGrid’s “high-quality inventory” fits perfectly with Outside.in’s efforts to populate its pages. “We’re not building a local sales force,” he emphasizes.

The CityGrid deal also complements a separate Outside.in initiative to bundle similarly themed local Web sites (i.e., foodie sites) to provide scale for national advertisers. That effort is just beginning to roll.

Josephson adds that the CityGrid deal was negotiated by Rob Delacruz, Outside.in’s new chief revenue officer. Delacruz was previously Microsoft’s head of business development for local, mobile and search.

Outside.in CEO Mark Josephson is appearing on “The New Local News” session at ILM:10 along with Warren Webster of Patch.com, Satbir Khanuja of DataSphere and Darian Shirazi of Fwix.