atlrus - 3:44 pm on Oct 4, 2012 (gmt 0)
You also assume too much about the intention behind the search - mainly, that a small business should be number 1. It shouldn't. Google isn't there to act as a slightly more functional Yellow Pages - their goal is to provide information, not sales leads.
You missed it again.
The point is not that small business should be in the top ten results, but that a relevant business should be in the top 10. The algo should aim to return watch repairmen in NY when the user searches for watch repairmen in NY, not yelp pages. In this example just so happened that the relevant business is a small business.
Why isn't google returning at least one watch repairman in the organic results? Because google is not a search engine anymore - there are 10 perfectly targeted ads running (no mistakes there, they are all NY watch repairmen). In other words, google is indeed a version of the Yellow Pages :)
Basically people these days are searching ads on google, they just don't realize it.