I have been a long-time individual to dispute acusations of risks of linking to a legitimate, non-spammy website other then your own directly for the reason to gain pagerank.

However, I must say your explanation of your reasoning to not do it is non-disputable and very well said.

On the other hand, I really don’t think Google’s goal is to chain webmasters to fear of linking to other websites. If everybody did not link to another domain, then google’s entire algorithm would be entirely worthless.

What I’m sure they don’t want, is for webmasters with high pagerank to exploit their wealthy pagerank status by cashing in on its distribution. However there are clear alternatives to avoiding this, as stated by software engineer and google employee Matt Cutts on his blog. (www.mattcutts.com/blog) – the introduction of the attribute “rel” with the value “nofollow” for an anchor link.

Placing nofollow’s on outbound links placed purposely for advertisement keeps it fair, the url to where this nofollow link would be pointed to would not gain pagerank from your website true, however this is assuming that your website gets a descent amount of traffic to make advertising even worth half your time or effort.

So in short, don’t be afraid to “naturally” place outbound links, just dont blatantly try to sell outbound links in attempt to exploit Google or any search engine in some fashion.

Just my $0.02

In this case, I can imagine the traffic O’Reilly gets, and I have some sites that get less and some that get more. Based on my experience with running text ads, I can make a pretty good guess at how many clickthroughs the ads get—try to find them at the bottom of the sidebar at XML.COM yourself. They’re pretty well buried on the page and I’m sure the clickthrough rates are low to nonexistent.

There’s a fine line, obviously, but Tim O’Reilly knows more than we do about the details of this particular case:

it’s become clear to me on investigation that these folks are indeed paying us for our Google rank, and not just for clickthroughs. We just aren’t targeted enough for their ads to be justified on a click-through basis.

The question that seems to be on the table is “is selling PR ethical”, and the answer is no, it’s even against the Google’s terms. But selling a text link, which is nothing more than a short text ad, is about getting traffic and instead of buying clicks through a PPC, you go to the source. This isn’t just ethical, it’s good business.

That doesn’t take into account the fact that Google might penalize you. Selling PR is against their terms and the fact that selling a link is still selling PR, regardless of the intent, is a side note really. Google is the one forcing that rule. People don’t get penalized for buying billboards, or more to the point, for putting ads into a billing insert or another company.

Basically, Google has found a way to create a monopoly on selling text links. If you sell them on your own you might get penalized by Google. I love Google, but I’ve always disliked this policy.

I link to the different groups I join and different people I meet with hopes of getting a few returns links.

Selling and bartering links within your social network is a natural extension of the networking.

IMHO, It is not until you get into massive programatic link spamming that trouble occurs.