Newbie Q: Modifying string passed by reference.

I know the test code is messy but it illustrates my concept. I would like to know why
this very simple  test program outputs:
test
test

instead of what i would expect:
test
modifed

here is the code.

#include <stdio.h>
#include <stdarg.h>
#include <stdlib.h>
#include <string.h>
int main();
int modify(char *p);
int main(){
        char *p = "test";
        puts(p);
        modify(p);
        puts(p);
}

int modify(char *p){
        p = malloc(sizeof(char) * 20);
        strcpy(p,"modified");
}

I am sure I am missing some simple concept...but can anyone explain what that
concept is? I have a few thick books on C and cannot deduce what the problem
would be. The code below SHOULD be of the same concept and it produces the
expected result. It's output is
1
2

#include <stdarg.h>
#include <stdlib.h>
#include <string.h>

int main();
int modify(int *p);

int main(){
        int *p;
        p = malloc(sizeof(int));
        *p = 1;
        printf("%d\n",*p);
        modify(p);
        printf("%d\n",*p);
}

int modify(int *p){
        free(p);
        p = malloc(sizeof(int));
        *p = 2;
}