How does Google use "conversion data" for organic search rankings?

A colleague of mine had been reading about the fact that Google uses "conversion data" to help determine quality of a site for ranking it in a SERP (Search Engine Results Page) for a keyword search. He had some questions about how Google obtains this data. Essentially: How does Google determine that a user is converting after the click? Especially if Google Analytics is not being used by the visited site. I wanted to share my perspective on my blog. This is related to the May Day Google algorithm update.

His question:

A quick question on bold text below – how would you interpret this?  “behavior data” - CTR on organic links in SERPs?, time on site?  “conversion data” - what do you think they define as a conversion on a site?  Thanks in advance.
The problem with long tail keywords are that despite generating some absurd percentage of overall site traffic for well-optimized content, most of the time the quality of traffic isn't good enough to convert.  I would guess a significant percentage of long tail visitors are sent to a website because search engines aren't quite sure whether your content is up to snuff for shorter, highly competitive, generic keywords.

Maile Ohye all but confirmed the fact Google is moving to user behavior data as a better signal than say keyword density to rank content in the SERPs.  She also hinted at Google using conversion data for organic ranking signals as well, which got me worried yet again about what Google considers a conversion for my websites (heck, I might introduce a quality score all my own to Google on that one!).

Source
My response:

From what I've read, there are at least two ways for Google to gauge conversion on your site:

1. A large percentage of visitors who click on your organic listing do not return quickly or at all to the SERP by clicking back to it or do not return to Google quickly to conduct another same or similar search. Also, if they do not perform the same keyword search or a refined search on the same keyword phrase, they likely found what they were looking for on your site. They can assume amount of time spent on your site by when a visitor returns by clicking back or by when the same user returns to Google to conduct another similar search.

2.  Another way they can gauge conversion is if you have Google Analytics turned on, and even better: If you have conversion tracking turned on and if you are advertising via Google AdWords. Similar additional ways they gauge conversion: Sites using Google Checkout, people using Google Chrome.... Interesting, although a tad "conspiracy-theory" article on their data collection here.

SEOMoz is a well-respected SEO source, and they concur:

First, let me state that I do think they use all the data they collect (or will collect) from search query logs, Google Analytics, Google Adsense, Google Toolbar, browser extensions, Doubleclick, FeedBurner, etc. to improve both their ranking algorithms and ads targeting technology. That is the reason, in my opinion, they offer all of these tools for free.  The data they collect is far more valuable.  It is so valuable that Ask is even considering selling this data.


and then also this, which confirms my statement above under #1, and speaks to your comment about CTR from the SERP page:
if we know that people are clicking on the #1 result we’re doing something right, and if they’re hitting next page or reformulating their query, we’re doing something wrong.

Source

Fascinating, huh? ;)