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David Milhm, the Director of Local Search Strategy for SEOmoz just did an awesome "White Board Friday". In this video he does a brief overview of the local algo and how it's changed over time. Toward the end he talks about how more offline signals are or will start coming into play.
I'm impressed he could boil the history of the local search algo into such a brief video. Well done!
Evolution of the Local Algorithm - Whiteboard Friday | SEOmoz
And just to speculate a little bit, because I love to speculate, going forward I also think we're going to see Google potentially integrating some offline information into the local rankings. So what do I mean by that? As we get more and more comfortable, we as a society get more and more comfortable with things like Foursquare check-ins or Facebook check-ins, using our phones to make mobile payments, using Google Wallet, or companies like Square or LevelUp, these types of things, loyalty programs, Google has acquired a company several years ago that focused on digital loyalty cards, these types of offline signals about how we're actually engaging with businesses in the real world, I think there's no reason that they wouldn't try to incorporate those into their local rankings going forward.
So keep in mind through all of this Google's goal has been to identify what the most popular businesses are in a given category, in a given community, and what better way to gauge popularity than the number of people actually buying something at a business or actually visiting a business and checking in.
I'm impressed he could boil the history of the local search algo into such a brief video. Well done!