Many SEO companies sell "Directory Submission" packages to clients, charging hundreds or even thousands of dollar to submit a site to hundreds of so-called "directories". It's easy to see why a site owner might be tempted by such a service. After all, Google and the other search engines rank sites with more in-bound links higher in the search results. The more the better - right?
Wrong.
With Google, it's all about quality, not quantity. A thousand low quality links doesn't equal one good quality link from a site that's an authority in a given field.
Many of these "Directory Submission" services simply involve submitting your site to very low quality links pages. After all, that's what a directory is... a list of links. Many times, the companies selling these services simply just created their own links pages, branded them as "directories" and now sell a submission service to these links pages which they own themselves!
Up until a short time ago, Google actually advised people to submit to directories in their Google Webmaster Guidelines. After all, in theory, submitting to a directory could be done for perfectly legitimate reasons, like driving traffic to your site, or helping the search engine spider to find your site in the first place.
The fact that this advice was removed from the guidelines is telling. It shows that Google has recognized that the practice of submitting to directories has been so abused as a way to manipulate their algorithm, that it has negatively impacted their ability to detect the best sites with the best content. Google needs to be able to recognize "natural" back links to a site, not ones that were acquired in such an easy way with little to no value driving it. Again, how easy is it to create a simple links page directory, or simply submit to a directory to acquire a link back to your site?
To understand Google's thoughts about this, we have to understand Google's Philosophy on Link Building. Google sees each link as a vote for the content quality of your site. If lots of people are linking to your site, your site must have some good content on it.
Any practice like mass directory submission is basically giving people a way to vote for themselves. Whenever a practice like this exists, Google is bound to shut it down. In this case, Google has simply stopped allowing most directories to pass their PageRank power down to the sites they link to. There are exceptions to this rule, however.
What Does Google Think? There are a few high quality directories that Google recognizes as having value. The Yahoo directory and DMOZ are the two best examples. Google accepts these as legitimate directories since they involve a hand review of each site to ensure quality standard of the sites listed there. Thus, these types of directories actually provide Google with a great 3rd party reference for the sites listed there that they are decent quality (although some would argue that these directories also allow plenty of junk in as well.)
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