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Aug. 16, 2007 at 9:18am Eastern by Barry Schwartz
Google Updates Link Scheme Webmaster Guidelines
I reported on a WebmasterWorld thread, which noticed Google added the word "excessive" to their link schemes Webmaster guidelines page.
The line now reads, examples of link schemes can include "excessive reciprocal links or excessive link exchanging ("Link to me and I'll link to you.")."
The new word added to this page, as of yesterday, is "excessive." The big question now being debated amongst webmasters and SEOs, is what exactly is "excessive" reciprocal links and link exchanges? At what point are you getting "excessive?"
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By Barry Schwartz
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See Related Stories In: Google: SEO, Google: Webmaster Central, Link Building: General
Reader Comments
Matt Cutts has warned people against "excessive reciprocal linking" in the past and though people have scratched their heads over its meaning, the language was less ominous then.
I find it to be acceptable now, as well.
Most people don't need that many links. The perpetual chase after links is a waste of time and resources for the majority of Web site operators.
But Google needs to understand and accept responsibility for the fact that it is now compelling Web site operators to chase PageRank because the Supplemental Results Index won't be treated fairly in the search results.
The real problem remains and Google has to fix that, too. Otherwise, their link manipulation nightmare will continue to get worse.
Not sure if I'll get time to do a post about this, but I appreciate the feedback that Sebastian and others gave. This was newer documentation (I'd asked for comments on our newer documentation on my blog), and I agree that we should have put "excessive" in there from the start.
Everybody knows that somehow someday Google would have come with this approach and its here now. as celebrity mentions above you can rank well on Google by getting reciprocal links for your site like a mad and you are not sure to rank on the other search engines for that same reason - this is really the good news.
For those readers who don't understand "automatic reciprocal link builder sites" .. avoid any software or service that guarantees links such as "give us $50 and we will auto-link you to 300 sites overnight".
If you do use a software or service to manage link developement, make sure it is EDITOR BASED so that you are the sole decision maker on which sites you link out to.
Link exchange has existed since the birth of the WWW. Webmasters have been branding their websites with relevant editor based link exchange way before Google existed. Lets not throw the baby out with the bath water. Link exchange has its benefits and usefulness when you maintain editorial discretion and maintain a normal healthy volume.
Thanks to Google for providing some clarification to their Link Schemes guideline.

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Excessive use would be using the automatic reciprocal link builder sites. (ie freelinkexchange.com) I use it for my site and one day google suddenly removed my top 5 positioning on all my keywords.
However, its important to note that the only reason they were top 5 is BECAUSE of my reciprocal link builder site I was using.
Thats the bad news. The good news is that yahoo and the other search engines don't care how you get those links.
So its up to you to decide how you want to proceed from here knowing the consequences with google.