On the community forum the following question was posed.
"I understand the importance of incoming links (very informative article, by the way), but aren't reciprocal links counterproductive? Obviously, you need to reciprocate in most cases to have any success, but don't outgoing links hurt your site with respect to search engine placement?
An SEO-guru friend of mine explained it to me this way: If your goal is to fill the bucket with water, you don't want any holes in the bottom where water can leak out. Incoming links help facilitate your goal (filling the bucket), but outgoing links represent the holes in the bucket. What are your thoughts on this?"
Here is my response:
To my best knowledge, reciprocal links are not counterproductive. In fact, they are entirely necessary and helpful. Here's why.
The Difficulties Without Reciprocity
Without offering a reciprocal link, you are going to have a very tough time convincing anyone to link to you. On the Internet (and in much of business) reciprocity is simply a gentleman's agreement and it is understood that reciprocity should always be offered.
Now, if you have hundreds of pages of very high quality content, your site provides a useful utility, or you are a non-profit organization then yes, it is possible for you to gain some incoming links without giving any in return. But do not email website owners asking them to give you a link if you won't give them one in return (or pay them).
Also, as explained in my article, "Building 5,000 Links to Your Site", if you have an affiliate program in essence you are offering something in return for links to your site (commissions). As such, with an in demand product or products, and a proper promotion strategy it is possible to gain significant number of links via an affiliate program. I was able to develop about 4,500 incoming links through an affiliate program for the last company I consulted for, so this is surely a good strategy for link-building (and sales-building of course).
Properly Organized, Outgoing Links Can Add Value to Your Site
There are good ways and bad ways to list outgoing links. What you do NOT want to do is simply create a static HTML page with link after link and upload this to your server. And if you absolutely must do it this way be sure to include the following META tag in yourtag so the search engines will not index the page or follow the links on the page.
It is true that search engine algorithms tend to not like these types of pages. Without the above Meta tag, often your rankings will be reduced if you just have a long list of links. This will be especially true if you link to any non-relevant sites as search engine spiders often base part of your site's rankings on not only how many sites link to you, but the quality (determined by number of incoming links and rankings) of the sites linking to you (and the sites you link to). It is both quantitative and qualitative.
So essentially, you do not want a long list of links and you do not want to link to sites that are not on the same topic or are very poorly developed.
Done right, however, outgoing links can add value to your site. As long as they are relevant and properly categorized (not all on one page) (preferably in a dynamically generated directory) you should not hinder your rankings and be offering your visitors a value-added service that will encourage repeat visits (and build a lot of incoming-links).
This is one of the reasons why I recommend using the Zeus Link Manager.
By using a directory of links strategy such as Zeus, you offer value to your visitors and you do not run the risk of having the engine spiders leave your page or lower your rankings (since the directory pages are created dynamically and most often cannot be indexed by the spiders).
So in summary, outgoing links are good because
They enable you to exchange links with relevant sites to build incoming links.
If properly categorized in a directory they can add value to your site yet not hinder your search engine rankings.