We've wandered off viral marketing and onto "How does a directory add value?" But let's run with that for a moment.

I have serious reservations as to where 99.999% of directories on the web add value nowadays, or at least how they are going to add value in the very near future.

First off, the notion that a directory is going to produce business is rather a myth IMHO. I've yet to see a web directory register a sale, or even a decent enquiry for my business. And we've been listed in a few "good" ones that you might expect to perform, yellow pages, brabys, anazi... commercial jobs that have spent money on promotion. They told me about all the clicks and views I got - but no sale. I reckon they included robots in the count and the rest were probably competitors looking to see who was there. You can't argue with no sales, though - and we do track the source of sales.

Then we have hordes of free-to-list directories. Again, how much direct business can you expect. I recall an approach I came across that would list a site on about 250 000 directories for about $10. All automated of course.

The hard truth is that the vast bulk of potential customers shopping on the web tend to use search engines to find businesses - not directories. So what is/was all these directories doing on the web.

When you look at the early directories that seemed non-commercial, you generally found an SEO guru behind the site. This wasn't about getting human customers through the door. This was about building inbound links that would make your website seem more important to search engines. So that customers could find you on the search engines.

This has worked for probably the last four years or so, but there are ever stronger indications that directories might become a problem.

Search engines are clearly more interested now in relevant links and far less interested in numbers. Too many links too far from topic and expect a dose of pain.

Search engines seem to be massively devaluing links from the vast majority of directories. They are far more interested in links from social sites - digg and the like - and there has also been some reference to forum sites.

As an aside: This shift has already seen a big surge in automating SEO attempts to build links through forum sites. (We've noticed, haven't we Duncan ). The key with these social sites is that we're back to human interpretation of value - the core ingredient of what made search engines work well in the first place, plus you get the bonus that if you can establish a decent impression to the human traffic, you are going to get business.

I could go into this much further, but it's getting late. So let me close with some reading material with some notable extracts quoted here.

One thing I heard at SES London was that people wanted a way to report paid links specifically. I’d like to get a few paid link reports anyway because I’m excited about trying some ideas here at Google to augment our existing algorithms. Google may provide a special form for paid link reports at some point, but in the mean time, here’s a couple of ways that anyone can use to report paid links:

- Sign in to Google’s webmaster console and use the authenticated spam report form, then include the word “paidlink” (all one word) in the text area of the spam report. If you use the authenticated form, you’ll need to sign in with a Google Account, but your report will carry more weight.
- Use the unauthenticated spam report form and make sure to include the word “paidlink” (all one word) in the text area of the spam report.

As far as the details, it can be pretty short. Something like “Example.com is selling links; here’s a page on example.com that demonstrates that” or “www.shadyseo.com is buying links. You can see the paid links on www.example.com/path/page.html” is all you need to mention. That will be enough for Google to start testing out some new techniques we’ve got — thanks!
Matt Cutts on paid links - 14th April 2007
Clearly, Google is going to war with paid link building - and just in case you think they will think twice before throwing the baby out with the bathwater...

Don't anger the Google gods.

That's the lesson Paul Sanar learned--too late--last year. Up until last fall, the 21-year-old New Yorker depended solely on the search engine to keep traffic flowing to Skyfacet.com, his online diamond business; Sanar says he sold $3 million dollars worth of jewelry a year. Then, he says, Google turned its back on Skyfacet.com, condemning the site to Internet obscurity.

In retrospect, Sanar thinks he can trace his problem to a search marketing consultant he had paid $35,000 to improve Skyfacet's Google rankings. He now believes the consultant mistakenly replicated content on many of the site's pages, making them look like duplicate--that is, spam--content. But even after he reversed the consultant's changes, he couldn't get Skyfacet's pages out of Google Hell, where they remain today.

Other online businesses have similar stories. MySolitaire.com, another online diamond business, spent January to June of 2006 in the supplemental index. Amit Jhalani, the site's vice president of search marketing, says he figures that cost his business $250,000 in sales, and he says he still doesn't know why the site's pages got Google's thumbs-down.

"So many of the rules are vague," Jhalani says. But he admits that he tried gray-area tactics like buying links from more established sites to juice his traffic. "For a small site like ours, you have to stay right on the edge to compete with sites with bigger budgets," he confesses.

Jhalani says he removed the links that may have offended Google, but the site remained in Google's gulag. Jhalani wrote Google asking the search engine to reappraise MySolitaire; nothing happened. Since Google ranks sites partially by the quality of sites that link to them, he painstakingly contacted every site that seemed to be of low quality and linked to MySolitaire, asking them to remove their links, sometimes even sending cease-and-desist letters.
extracted from Condemned to Google Hell - Forbes - 30th April 2007