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Do keywords in drop-down menus count?
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In running one of my campaigns in SEOMoz Pro, it was recommended that I reduce the amount of times a keyword is used to 15. On the actual page, there are fewer than 15, but when you include the number of times it is used in drop-downs from the nav bar, the number is 53.
I know there is really no hard and fast rule about how many instances of a keyword make for keyword stuffing and the drop-downs only use the term where needed. Without it's use, it would be difficult to navigate the site.
Is this a problem or should I focus on more important fixes?
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Agreed. This also would have an effect on sitelinks displayed. Focused keyword navigation leads to better sitelinks.
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Don't forget that internal anchor text can determine which pages Google shows on a given SERP. If you do overuse a keyword in your internal anchor text it does dilute the keyword across the site. It's perhaps better to reduce the number of times a keyword is used in internal anchor text to focus a keyword, and links from that keyword, onto a particular page.
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Take a look at the Lynx web browser to see how Google would see the website:
Alternatively, check out the Google cache of your website or use a googlebot simulator. You will see that everything in your HTML, including your navigation, is read by Google.
If you are running an eCommerce operation you can safely ignore some of the warnings that SEOmoz shows. For example, many eCommerce stores will have an excess of 100 links due to a large navigation, shopping categories in the sidebar, and product images/titles. The same is true for keyword count.
As long as you aren't overdoing it you are fine. If you have a tennis website, a proper navigation might have "rackets" as the parent category, and then list child categories by color. You should not have the children listed by "Blue tennis rackets," "Yellow tennis rackets," and so on. Duplicating a keyword like this is not necessary.
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From what I have seen, yes keywords in drop down menus count. It is searchable text. However, the search engines are more sophisticated and can count in-content and out-of-content keywords. I don't believe you should worry about it. But it is always worth testing. Do you currently rank for that keyword?
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