Categories and tags are both valuable in terms of SEO, but they serve entirely different organizational purposes. When business owners and novice bloggers don’t thoroughly understand the difference, they wind up with a site that’s easy for search engines to find but difficult for humans to navigate.

Here’s what you need to know in terms of SEO

Both categories and tags are useful in terms of optimizing for search and discovery if your category and tag names are commonly searched terms in your field. Use keywords that you want associated with you brand in your categories and tags.

More importantly, here’s what you need to know about site visitors

They’re on your site for a reason, and your blog’s taxonomy, or classification system, should make it incredibly easy for them to find what they’re looking for while they’re there.
You know what isn’t easy? Trying to interpret an unfamiliar industry’s jargon or a particularly creative person’s witty but unhelpful tag names. Trying to sort through fifteen categories that all seem kind of similar to find the one that will have the specific information you’re looking for.

Forget the search bots when it comes to classifying

Focus on your site’s visitors instead. What will make it easy for visitors to find what they’re looking for? Do that.

When it comes to categories…

Think of a Table of Contents. You should be thinking big, broad, and general with little overlap among categories. By narrowing down your categories to a few generic topics, you’re helping site users who may already be overwhelmed with information overload. You’re making it easier for them to make choices about how they interact with your content.
For example, our categories include 5 distinct areas: Content Strategy, Entrepreneurship, News, Productivity, and Aware-ness (otherwise known as Uncategorized). While we could add categories for Social Media, Blogging, and Web Content, all of those are actually sub-categories of Content Strategy. When we talk about Social Media, we’re still talking about Content Strategy.
An air conditioner repair business’ blog may include categories like: Heating, Cooling, and Air Purification. Heating would include all of the posts related to the heating aspect of their business, from choosing between a gas furnace or a heat pump to tips preparing homes for the cold winter months. Cooling would cover everything from ceiling fans to energy efficient thermostats for hot summers in Louisiana.
Is there a right number of categories? Not exactly. In general, I’d recommend trying to limit your categories to 5 topics. But ultimately, the number of categories should reflect the breadth of your website’s scope. If you address a variety of distinct topics, you may need more than 5 categories. If you have a very limited scope, you may need no more than 3.

When it comes to tags…

Go crazy. Your site’s tags are more like a detailed index, and so it’s perfectly acceptable to get down to the nitty-gritty with tags. A post that we’ve categorized as Content Strategy may be tagged with all of the following: social media, blogging, web content, startups, rebel branding, SEO, infographics…the list could go on, hyper-classifying the post down to dozens of possible micro-details.

If you’re still not sure you’re doing it right

Get some honest feedback from a friend, an associate, or a professional. Let them poke around on your business’ blog and see if they can easily find important information and then revise and rework using their input.