Dan Thies writes a very interesting article about Keyword Competition Metrics where he analyses how you can define the level of competition for a search term. Dan looks primarily at three types of competition data:

• How many sites/pages are competing?
• How well linked are the top ranked sites?
• How much are people paying for PPC traffic?

The number of results given by Google for the query is a bad estimation of competitivity. Dan suggests to search for intitle:search inanchor:search instead, because your competitors may use the keywords in the title and in the anchor texts.

Orion has also posted a good post on SEW forums about Keyword Competitiveness. He points out that keyword competitiveness means different things for different people:

• Some have stated that search results is a measure of keyword competitiveness (KC).
• Others argue whether or not the search volume from Overture or WordTracker is a fair indicator of keyword competitiveness.
• Many claim that the search results from Google combined with the keyword volume from Overture provides a better estimate of the competitiveness of a term or phrase(s).
• Even others use a composite metric from keyword tracking tools coming from dissimilar meta engines. This is equivalent to combining dissimilar analytics and business intelligence metrics from dissimilar media outlets.

Interesting subject, stay tuned as we'll talk about it on that blog in the future.