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Google Ranking Algorithm | Devaluing Exchanged Links
A member of Google's Search Quality team recently posted the
following link building information...

Google has tremendously refined its link-weighting algorithms. We have more people working on Google's link-weighting for quality control and to correct issues we find.
The blog post was summarized by further stating that...
...even though improved algorithms have promoted a transition away from paid or exchanged links (emphasis added) towards earned organic links, there still seems to be some confusion within the market about what the most effective link strategy is. So when taking advice from your SEO consultant, keep in mind that nowadays search engines reward sweat-of-the-brow work on content that bait natural links given by choice.
 
As you might suspect, the reference to "exchanged links" created quit
a stir within the SEO community. Many worried that Google meant all
reciprocal links. Others argued that just those that exhibit a pattern of
attempting to manipulate PageRank and link popularity are affected.
We'll cut straight to the chase and save you all of the banter and buzz
that was tossed around during this episode.
If your links are there because they add value to the site visitor, they are good—even if they
happen to be reciprocal. If CNN writes an article and links to your site
and then you link back to reference CNN, then don't worry about it.
You're cool. This is normal reciprocal linking behavior and Google
expects it (besides, CNN is white listed anyway and that good standing
rubs off on you!).

On the other hand, if your reciprocal links are in fact for nothing other
than artificially increasing link popularity and PageRank, then you hav
wasted your time, energy and money acquiring that link. Furthermore
you may have also painted a target on your site telling Google to be
wary of ever ranking any of your pages at the top of the search results
(but, hey, we've been telling you that for the past couple of years).
Remember that, going forward, it is becoming increasingly important
that you focus on sustainable linking strategies. These are the
strategies that Google will continue to like well into the foreseeable
future. In other words, beware of any strategy that suggests you shou
join a network of sites or content exchange system because these
strategies are way too easily detectable by Google no matter what the
networkers are telling you! Trust us: it's only a matter of time before th
sites that participate are identified and penalized en masse—quite
possibly permanently!
By the way, another interesting comment in that same blog post
referred positively to the strategy known as link baiting. This is also
something that Google's Matt Cutts has also endorsed in his blog.
So, from Google's point of view, the bottom line is:
 Paid Links Will kill your site's ability to pass PageRank
 Link Exchange programs Useless and often dangerous
 Reciprocal Links OK, but only if they are natural and add value for the site visitor
 Link Baiting Excellent link building strategy and endorsed by Google

Reference: Google's Search Quality team member's blog post.

Google Co-op Influencing Travel, Auto, and Health Sectors

Even though we've discussed Google Co-op in the past, as well as Google's CSE (custom search engine), we haven't yet touched on the growing effect it's having on select segments of Google's organic search results beginning back in May 2006.

To illustrate, do a search for Las Vegas Hotels. Notice at the top of the search results we get a option to Refine Results for Las Vegas Hotel

refine results image

Bear in mind this isn't some generic search query that typically begs refinement. Regardless, we see Google offering suggestions ranging from Dining Guides to Tours. Now we'd expect this to be the case when searching the much more generic phrase Las Vegas and it is. But, in our mind, the search phrase Las Vegas Hotels is already specific enough that we wouldn't need to refine it to include dining, tours, shopping, attractions, or itineraries. So the question is, what is Google really trying to do here?

We can't help but wonder if what we're seeing is actually the beginning of a new directory—or at least some experimentation into creating a trusted list of sites placed in human-organized categories. It's clear that sites that have been labeled by Google Co-op contributors are ranking highest for the terms with which they've been labeled.

These labels can have a potentially negative effect. For example, most sites that have a Google Co-op label of Lodging Guide appear in the refined results for Las Vegas Hotels, but do not rank well for the actual search Las Vegas Hotels. If your site was a guide to Las Vegas Hotels and you got moved from the main Las Vegas Hotels results into the refined Lodging Guide results just because someone labeled you with that tag, that could have a significantly negative impact on your traffic.

Since most hotel guides are typically lead-generation sites which collect commissions from sending customers to hotel sites, it could be that Google may be attempting to knock out the middle man and send people directly to the hotels themselves. And, in case you're wondering if you can opt out, it doesn't appear that you can—at least Google isn't showing any information on how to do so.

Previously the effects of this labeling weren't clear, but now we're seeing more and more cases where the Google Co-op labels are affecting a site's organic search ranking. The keyword phrases that bring up refined results are also very specific. For example, the plural Vegas Hotels will produce them, but not the singular Vegas Hotel. This suggests Google may be hand-picking specific high traffic phrases to experiment with.

What's even more unnerving is who's actually doing the labeling. A quick review of the contributors for the Google Health Topic Contributors reads like a who's who of BIG health sites—with no apparent way for the little guys to join what may be shaping up as an exclusive club of self-serving reviewers.

Although it may not be affecting your target search categories yet, we recommend that you study your sector and maintain a close watch. If Google expands this practice you will discover situations where it's advantageous and others where it disadvantageous to get tagged or labeled into any specific category.

Right now, it appears that getting your site labeled does more harm than good and may have a direct influence on how you can rank for specific phrases that Google currently activates refined results for.

We also can't help but think that Google is using Google Co-op to eventually replace or lessen their reliance on the DMOZ directory (due to DMOZ's current shaky state). Historically Google has always relied on human edited directories such as DMOZ to be a trusted reference to find high quality sites, but Google may need a back-up plan should that resource disappear or become irrelevant.

Right now Google's testing appears to be confined specifically to travel, auto and health related categories, but be sure to watch closely for the refined results to impact a search phase near you. We think it's very likely that Google may expand these refined results into many, many more keyword areas.