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We are working on a jobs and skills website (similiar to Skill Pages) and are deciding on categories. Rather than having load of categories like, for example, Builder, Electrician, Carpenter etc, we would like to have one word more general categories.

So for example we have House, Computer, Education, Art etc. So a builder would be in category Home and a few others. Will this style negatively effect our SEO and ranking? And if so, should we abandon and go back to traditional categories and sub-categories?

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You need to decide on a clear category structure that is unique in tree-form from top to bottom. This forms the basis of your information architecture and themes/silos of information. This helps search engines understand the core blocks of your content and how they are distinct/similar to each other.

Once that's defined, you can leverage taxonomy in the form of tags that you can tag topics with similar to the way StackExchange does (and I recommend you use the SE model as it's performing very well in search).

Some information you might find helpful on this topic:

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Considering WordPress posts that show up in both category and tag pages can be indexed I don't see any harm in having a builder in multiple categories. Though like many modern ecommerce websites with products in multiple categories. I'd suggest using a single URL for the builder page and don't display the categories in the URL.

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We will change our categories to traditional ones. SEO so far has been performing badly. Builder, electrician, plumber etc are all in House and google isnt picking this up. So we'll have to change to mydomain.com/builder and mydomain.com/plumber etc – Mark Jul 4 '12 at 17:18

In short:

It will affect SEO in the way that you could be potentially found more easily for your terms (House, Computer, Education, Art etc.), rather than Builder, Electrician, Carpenter etc.

But of course this will depend much on how you'll lay out the website. Keep in mind internal links anchor text and URL are still a signal to Google, although not as powerful as it used to be.

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We will change to builder, electrician etc as this is more likely to be searched – Mark Jul 4 '12 at 17:19

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