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I don't know if there is a real difference between Categories and tags in terms of SEO.

I read in one place that Categories should be fewer and used to set the general structure of the site, while tags should be used to group posts that are in different categories but share a similar key word.

For example, a post in Pizza category and a post Vegetables category might refer to London city, so London city could be used as a Tag.

Expanding on that, I was thinking that having multiple taxonomies and making tags heirarchial might be more convinient for me and for google.

Therefore, I can use Custom taxonomies plugin/codes to add more taxonomy groups and with heirarchy (cities in one group, hotels in another, etc), so as to index my posts exhaustively and in a heirarchial structure and convinient for referencing.

Is there any SEO side effect to this idea of multiple taxonomy structures?

Thanks.

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According to this answer there is no difference between tags and categories in terms of SEO. (In reply to your initial question.)

Since technically categories and tags are very similar, I assume that Google would also not see a difference between using built-in or custom taxonomies.

You can make your tags hierarchical and organize them in groups, but it's more for usability than SEO. Of course, making your site more usable and increasing the click-through rate and the time that users stay on your site are also important ranking factors. So I conclude that it does make a difference, although not a huge one.

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