penguin
With the recent refresh to Google's Penguin update and the continued subsequent refreshes from last year's Panda update many small businesses may wonder what impact these changes have on local search, but unlike the animals these updates are named after, the answer isn't so black and white.
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How an algorithm update impacts a local website depends on how the site ranks in the search engines. I previously explained how search engines distinguish between localized and non-localized queries and when thinking of how a major algorithm update like Penguin or Panda may impact a website's rankings these factors can come into play.

If a site is ranking purely organically based on a localized search or a local query like "New York City Pizza" their site's rankings could be greatly impacted if they were to be penalized by an algorithm update.

On the other hand, if a site is ranking as a blended local result via Places search, I have seen websites piggy back off the strength of it's Places listing regardless of an algorithm update. Meaning that while the site may have been severely impacted in strictly organic search results, it seemed to fare better if they query was integrated with Places search.

Maps Rankings vs Organic Search Rankings

Another thing to consider is where the website feels the impact from the algorithm update. Though they technically should, sites that were hit in the organic search results do not always seem to be impacted when it comes to searches on maps.google.com. I am unfortunately working with two local businesses that were impacted by Google's Penguin update. In both cases the organic search traffic of the websites have been cut by nearly half. However, the impressions and actions data from Google Places has gone unaffected during the recent updates as you can see in one of the examples below.
Google Places Impressions and Actions Graph

Conclusion

Regardless of where you're competing, be it local or national, its important to stay on the good side of Google. Even local websites can feel the wrath of Google and the traffic provided from Google Places is not enough to be enough to supplement the losses from Google's organic search.

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