Google would prefer that you build content that then attracts natural, unpaid links from sites that recognize content value and link for that reason only.
But the reality is that in our culture that which is valuable is bought and sold, and links are no exception. Links became the currency of rank. At one time there existed a network of link farms that could provide thousands of links instantly and bring sites very quickly to the top of the search. Then they got flagged as spam.
And in spite of Google's recent noises about link buying being considered black hat, nothing has changed, only the nomenclature. The link farms are now called structural buys on networks of paid links. Or template purchases released in Wordpress for free distribution. Or directory sites designed as platforms for outbound, paid links. Enough time has passed without any enforcement so now most competitive fields are already 'polluted' with paid links.
It's very clear that Google has a big problem on its hands. Because a link on a page that is purchased cannot be differentiated from a link that is natural. Links play an integral role in their algorithm, and that algorithm is broken because it can't distinguish between paid and natural links. So they're manually clocking paid links and they're asking us to do their dirty work. They are now asking owners to report buyers and sellers - Google wants us to report on our neighbors.
Can you see the problem this creates for everyone? What's stopping competitors from placing links on bad neighborhoods pointed at your site? And how can you defend yourself from those who use these tactics?
From Forbes (06.28.07):
Matt Cutts, a senior software engineer for Google, says that piling links onto a competitor's site to reduce its search rank isn't impossible, but it's extremely difficult. "We try to be mindful of when a technique can be abused and make our algorithm robust against it," he says. "I won't go out on a limb and say it's impossible. But Google bowling is much more inviting as an idea than it is in practice."
In spite of this claim, we know it's happening already, and that significant resources are being put toward developing negative SEO strategies aimed at competitor sites, primarily focused on tainted using inbound links as weapons of mass rank destruction.
On the other hand, because of the difficulties in identifying paid links with naturally occurring ones, it will probably be a long time before any genuine enforcement actions can be taken against this practice. One of our associates has reported hundreds of competitors on behalf of his clients, even kept logs on the reports so he could track the changes over time to see if any rank or PR loss was evident. After over a year of such work, we can report that the only sign we're seeing of any action by Google is the slowing down of the recognition of new links. Perhaps this may have some limited success for this reason: If you're paying a monthly amount for some links, and those links don't do anything for the first 2 months, then you may conclude that the purchase is not worth it. Our advice - stay with it through the first 3-6 months before drawing that conclusion. While the initial months will see no push, eventually, the PR will flow to you, if you are patient. Of course this assumes that you are buying from structures that are not openly selling, and take care to follow some basic restrictions posted here.
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