The 1% fee for the advertiser, that's quite the same as many of the exchanges - 0.5% fee for both parties. Margins can be quite thin when competing on LBC, so quite much of my profit as an LBC trader is going directly to Localbitcoins. BUT, the fee is actually not mandated. If both parties cooperate, it's perfectly possible to transact without paying the fee. For big trades and for many of my repeat customers I will always offer a discount if we can avoid the fee.
It can be some way for loose less in transaction