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Does Google prioritise local domains?
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I'm in Australia targeting Australian traffic. I often see US domains in the Google SERPS and wonder if that indicates an opportunity for local (Australian) domains to rank?
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That's highly dependent on the query itself. For example, for research-based searches, you'll see authoritative websites like Wikipedia dominate the search results as those kinds of searches are not relevant to any location. Think of a medical term, or a name of a movie, or a type of flower for example.
However, for navigation-based searches, and local services based searches, you'll see very localized results. If you search for "plumber in CityName" - you'll see different results every time you use a different city name.
It comes down to the search intent as Google always aims to serve that intent to the best of its ability & understanding.
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