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Come up with real facts that prove it does hurt.
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Come up with real facts to prove it does, otherwise your statement "Hasn't done link lists and web directories any harm" hasn't got a leg to stand on.
Google does not like manipulative links. Manipulation includes stuff like paid links, link swaps, and link injections. Reciprocal linking happens naturally on the web, and Google has a relatively high tolerance of them as long as they're not excessive and they don't have blatant manipulative footprints.
When you ask someone to link with a specific anchor text, you are making it painfully obvious to Google that the link is there not as an editorial vote for your site but to influence search engine rankings.
Now for the hard evidence.
A while ago, a relatively highly visible blog run by David Airey suddenly tanked on Google.
He couldn't make heads or tails of it. Then Matt Cutts, head of Google's Spam Team,
responded on his blog:
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The other thing I noticed is that it looks like you silently changed the terms of your contest and didn’t mention that to anyone....I believe your original linking terms said:
“You can describe the draw any way you like, as long as you link to my homepage (www.davidairey.com) using logo / graphic design-related anchor text. A few examples of what you could link back with include: logo designer, best logos, Edinburgh graphic designer, graphic design in Scotland, great logos etc. Be creative with it. Here’s an example contest entry you could use:
David Airey, an Irish designer who aims to create the best logos, is holding an anniversary prize giveaway. There’s more than $4,000 worth in free prizes! Find out how to enter by reading the details on David’s graphic design blog.
Feel free to add any other information you like, PLUS, for every 5 prize sponsors you link to (they’re all listed above), you’ll get 1 extra entry into the draw.”
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David Airey says:
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During the initial stages I did ask for specific anchor text - ‘logo design’ (I design logos), but was eventually warned off it. Too late perhaps?
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Matt's final response:
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Given that you’ve written about nofollow before and posted on e.g. Digital Point about selling links, and that you changed the linking terms of your contest without mentioning it in the updated post, I have to admit I’m skeptical that you didn’t think selling links could be an issue with Google. But I’m glad that you changed how you urge people to link to you and that you’ve stopped selling links on your site. It sounds like you’ve submitted a reinclusion request; I’ll ask someone to check on the status of that.
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Moral of the story: Any blatant signs of artificial link manipulation is a potential red flag. Relevance will not protect you.