You may be wondering how to handle some of the recent updates such as Panda and Penguin and whatever other black-and-white animal updates (Is the Zebra algorithm, next?) Google decides to throw at us website owners.
Here's the basic answer: LINKS STILL WORK. And they work well. If links did not work, Google would not be so concerned about the effectiveness of them. Also, if Google banned every single person they thought were buying links then you could just point a bunch of links to every competitor ahead of you, get them all banned and move to #1. It just doesn't work that way.
Now, with that being said, Google is getting "smarter" about link profiling. For instance, let's say you have a site about car insurance quotes. Before these recent updates, you could just create the anchor text for 'car insurance quotes' and point a bunch of links to that anchor text and your rankings would typically rise over time (obviously this is a little over-simplified because there are hundreds of factors in Google's algorithm like content, the age of your domain, your title tags, etc. but you get the idea). What's happening now is that Google is also comparing these anchors relative to other anchors that your site is linked to. So if you have 1000 links with the anchor text 'car insurance quotes' and no other anchors or just anchors with other similar terms like 'car quotes', that looks very unnatural and typically Google will no longer count all 1000 links. They may only count a few hundred of those links now instead of 1000. This is why rankings have dropped
for some people not because the site got banned or penalized. It was simply over-optimized and Google is readjusting for that over-optimization by discounting links they think are out of whack.
So how do you determine what anchors Google is counting on your site? You can use a variety of tools including Google Webmaster Tools but we use a site called AHREFS to view the "Anchors" for our sites and for our competitor's sites. There are other tools too but this is the one I prefer. I advise clients not to just optimize for terms like 'car insurance quotes' but to also sprinkle in more "natural" terms like 'click here', 'visit this website' and branding terms like 'Your Company Name' and 'www.yourdomain.com'. These can prevent you from over-optimizing your site and getting your links discounted by Google. They look "natural" because that's the way most bloggers or forum posts would link to your site if they were writing an article or post about you and your products. Also, by using a tool like AHREFS, you can also view the anchors of the top sites on Google and try to match your link profile to their link profile.