A Google penalty is the negative impact on a website's search rankings based on updates to Google's search algorithms and/or manual review. The penalty can be an unfortunate by-product of an algorithm update or an intentional penalization for various black-hat SEO techniques.
Reasons for penalties
History of penalties
Google have been doing updates to their algorithm for as long as they have been going to battle manipulation of the organic results. However, up until 05/10/2012 when Google launched an update they called Penguin, many people wrongly believed that low quality back links would not negatively affect ranks. While this viewpoint was common it was not correct as Google were applying such link based penalties for many years prior, only that they had not made it public how they approached and dealt with what they call link spam. Since this time there has been a much wider acknowledgement about the dangers of bad Search Engine Optimization (SEO) and a forensic analysis on the back links that websites have to ensure there are no harmful links.
Link based penalties
Penalties are generally caused by manipulative back links that are intended to favor particular companies in the search results, by adding such links companies broke Google's terms of conditions. When Google discover such links they apply penalties to discourage other companies from following this practice and they remove any gains that may have been enjoyed from such links. Google also take action and apply penalties to those who took part in manipulation and helped other companies by linking to them. These types of companies are often low quality directories which simply listed a link to company website with a manipulative anchor text for a fee. Google argue that such pages offer no value to the Internet and are often deindexed as a result. Such links are often referred to as paid links.
Paid links are simply links that people place on their site for a fee as they believe this will have a positive impact on the search results. The practice of paid links was very popular prior Penguin when companies believed they could add any types of links with impunity since Google claimed prior that time that they simply ignored such links.
These are links left in the comments of articles that are impossible to have removed, as this practice became so widespread Google launched something called the NOFOLLOW tag which blog platforms quickly incorporated to help curb such practices. The nofollow tag simply tells search engines not to trust such links.
Blog networks are a collection of sometimes thousands of blogs that aim to appear unconnected which then link out to those prepared to pay for such links. Google have typically targeted blog networks and once detecting them have penalized thousands of sites who gained benefits.
Guest blog posts
Guest blog posts became popular as a practice following penguin as these were considered 'white hat' techniques for a while. However, Google has since stated  that they consider these links to be spam.
Dealing with a penalty
Google say that they want to see companies reform their bad practices and as a result they demand that efforts are taken to actually remove manipulative links. Google launched the Disavow tool on 16 October 2012 so that people could report to Google the bad links they had. The Disavow tool was launched mainly in response to many reports of Negative SEO, where companies were being targeted with manipulative links knowing full well that they would be penalized as a result. There has been some controversy  over whether the Disavow tool has any effect when manipulation has taken place over many years.
Negative SEO started to occur following the Penguin update when it became common knowledge that Google would apply penalties for manipulative links; such practices as negative SEO have caused companies to be diligent in monitoring their backlinks to ensure they are not being targeted by hostile competitors through negative SEO services.
- BeatThatQuote.com - On March 7, 2011, Google purchased BeatThatQuote.com for £37.7 million and, within the same date, penalized BeatThatQuote.com.
- BMW - On February 6, 2006, Google penalized BMW.de for using doorway pages and dropped the site's PageRank to 0.
- Google Chrome - In January 2012, Google's Webspam team penalized the Chrome Browser's homepage for manipulating PageRank with purchased blog posts. The penalty dropped Chrome's homepage's PageRank from 9 to 7 and knocked Chrome off of the first page for important keywords such as "browser."
- Expedia - In January 2014, Expedia dropped 25% in search visibility which resulted in Expedia shares dropping 4.5%.
- Overstock.com - During fiscal year 2011, Overstock.com attributed a decrease of $1.05 billion in revenue to Google penalties
- Rap Genius - On December 25, 2013, Google penalized Rap Genius for 10 days. The result was a drop of about 700,000 unique visitors per day.
Effects of penalties
Google penalties can result in the drop of rankings for every page of a site, for a specific keyword, or for a specific page. Any drop in rankings brings with it a major drop in traffic for the site.
To find out if a website has been affected by a Google penalty, website owners can use Google Webmaster Tools as well as analyze the timing of their traffic drop with the timing of known Google updates.
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