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Does anyone have any experience with this and is there a reason to use one above another? Do the search engines look at these differently or penalize for using the combo?
I thank you in advance for any suggestions.
I've been going with the two letter abbreviations on their own and it seems to work well. My biggest reason? I think the average searcher will be economical when typing a search. I figured I needed a good stream of traffic, but trying to "have it all" was probably going to being counter-productive.
I also checked a lot of SERPs before this decision a couple years ago, and rarely found any ranking titles using both the two letter and the full spelling. Putting the spelled out state name on the page and the abbreviation in the title seems to be all it takes to rank for both/either.
I'm pretty sure that all the search engines have some kind of semantic engine that "knows" the two letter abbreviations and can tell when PA measn Pennsylvania and when it means Dad. The current attention on local search almost requires it.
On most searches, the city name (or the metropolitan area) is the geographical modifier that's usually attached, and the state name rarely enters into it. If you were an accountant or lawyer involved with state-specific services, though, the state would become much more important. If the city name occurs in several states, as, say, Portland, the state name is also more likely to be searched.
It's always safer to assume, though, that the state name might be included in the search... and, since either the full spelling or the abbreviation might be used, I'd include both. Since you're a directory, I'd put them both in the title, at least on the main page.
In the subcategory pages, or in a non-directory situation, perhaps they don't necessarily need to be in the title. Usually, if your main phrase is well targeted, it suffices to include both variants of the state name just on the page.
It helps to check the Google Keyword tool. Here's the order it returns for "ca tax forms" vrs "california tax forms"....
california tax forms
california state tax forms
ca tax forms
california income tax forms
In this particular example, chances are I'd put both "CA" and "California" in the title.