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Q: If having these inbound links is so important, why can't I take all those domain names I've been buying and set up free hosting and essentially copy the first page of my main website into each new site with lots of inbound links?
Ahh - good question Grasshopper. The reason setting up ubiquitous link sites does not work is because Google assigns an "importance" value to the source of the link. If the source of the link is a one-page website with duplicate copy or excessive keyword loading, Google takes away "importance" points. It may even decide to ban the target site from its index. What you have described is known as spamming a search engine.
On the other hand, if the referring site has useful, frequently updated content, and the referring page content is relevant to the target site (ie: an article about selling a business that contains links to a business broker website), Google adds "importance" points to the referer, which automatically reflects on the target site. Google catalogs the fact that a relevant inbound link to your site exists and that helps your site ranking.
It's all about Google's desire to provide value to their users. Displaying search results that are not really relevant to the search phrase entered by the user is not good for Google's customers. Google wants to keep its PPC ad revenue high and returning the most relevant search results keeps users coming back.
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A theory I have (unproven but my SEO spidey sense is tingling) is that if the target site is hosting Google PPC (pay per click) ads, search phrase relevance is elevated to a new level because if affects Google's bottom line!
You have failed to snatch the pebble from my hand Grashopper, but with patience and guidance from the Master you will grow stronger in your SEO quest.
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