Can anyone tell me what are paid links? and why google sees them as spam? I'm curious if this affect paid directories, for example if i submitt my link using paid submission....
A paid link is simply a link that you pay for. Search engines consider links as votes for the popularity and relevance of your site, so paid links that aren't explicitly declared as not passing link juice (using the nofollow attribute, etc) are treated as spammy by the search engines (if they can detect them). Generally spammy links won't benefit your site's ranking, but they generally won't hurt it either.
With paid links on web directories, the value of the links really depends on how much editorial control is exercised by the directory owner. If they approve all links without checking and rejecting the bad ones, then the search engines will consider that directory a link farm, and will consider all the links on it as spammy. If links are only approved if they meet a high standard of quality and relevance, then the search engines will likely regard the directory as an authority site, and will give the links on it some link juice.
They are seen as spam because they are - if used without nofollow attribute - regarded as a means of unnaturally trying to usurp SERPs. Any sites accepting paid links therefore run the risk of a Google penalty which is not something you want to experience.
Well, it can pay to circumnavigate them... in the short term, at least. But Google has a habit of catching up with those who don't play ball, and will punish them, sometimes for a very long time.
I'm not sure Google always finds out easily. I know of many sites that have use spam tactics for a long time. Some I've even reported and yet they still benefit from their underhand antics. Google does have a tendancy to catch up, but not always quickly.
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