GoogleGuy says "search by location" is still experimental.
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Hi orlady, right now it's still fairly experimental, but we wanted to let people play with it because they could still get some results already that they might not find elsewhere. I can absolutely believe that we'd miss a few good results right now.
I liked your example of "methodist"--I assume you were looking for churches, not hospitals? Just to pick a city at random, let's use pigeon forge, TN. If you search for "methodist church" nearby that city, you get higher precision than if you just typed "methodist." I wouldn't claim that it finds every methodist church in that area, but it does find a nice local directory site that you can then find some really good answers from. So the search result doesn't immediately give perfect precision and recall, but it does point you to some resources that you might not find just poking around by yourself. I would say that local people definitely can find places where the recall is lacking, but it already provides a nice solution for people outside the area to start with their research. Applying old power-searcher tricks such as tacking on a "united" or "first" to the methodist church query lets you possibly unlock more potential results too.
Anyway, I enjoyed your post. I think if people have the right expectations (right now it can't replace a local person's experience, but it can be better than what an outside visitor would find on their own), it can be pretty fun to play with this demo. :)