Spammy link for each keyword
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Having a landing page for each area is good for as long as it serves a purposes for users who are looking for something in that area, look at this company http://www.just-eat.co.uk/ they are flying with all their results at the top of the engines for all their takeaway town keyphrases... look at the difference between the two sites, espcially at the footer they have less links and no exact anchors used, they just mention the big towns without the keyphrases before it... this is biggest school boy error hungry house has done... and by having exact anchors in the footer like this will result with too many internal exact anchors, causing you to hit over optimization area!
TUT! TUT!

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So, here's the question..... Is the big list of anchor text links in the original post on this page dangerous for hungryhouse?
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Yes, that's the question! Similar problem on a client site.
I'm optimising the menu system for a scrap car recycling company. Unless I stick in a nofollow, the anchor text in each link in this navbar will be the "description" Google takes for the page. I'm trying to optimise each of the location pages so I might not need to do this.
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That's indeed the right question

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I agree it does look like a schoolboy error... but do you think you'd avoid overoptimisation if they only use this style of footer on the homepage. Just taking the homepage on its own, they've used the word "takeaway" 54 times for (amusingly) 3% keyword density.
Hungryhouse don't appear to be ranking anywhere near as much as their budget (TV adverts, newspaper, etc.) so I'd imagine they've probably been penalised somehow.
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Do you know about "Penguin" link overoptimization problems?
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I would be very carefull the mis-use of no follow can land you in trouble... looking at your screen shot talking about the menu, the word scrap cars is repeated over and over which there is no need, remove the scrap car from the menu, BUT keep on the landing page title as scrap my car in bolton (and then optimize your phrases in the meta tags) then this would be better, why not have Scrap Car Locations instead of Location
You are falling into the trap of over using internal anchors, as if there is 1000 pages, thats 1000 internal exact anchors saying scrap car bolton etc
same applies if you do within the footer site wide links as per hungry house, they just need to change it like justeat.co.uk have it, then hey presto ALL GOOD AGAIN (provided external links are not also over used

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as per my previous reply above, its too many exact anchor links which is causing the over optmimzation problem... remember these are site wide links, so every page has this anchor text, so again if there is 1000 pages then thats 1000 internal exact anchors causing you to get hit by google latest over optimization penalty (AKA PENGUIN)
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Yeah... which is why I wanted to know why a major brand like Hungryhouse thought it was okay. The answer is "they're wrong" I guess.
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Where have you heard it can not?? Google can read all the code on the site including simple code like this, it's mainly heavy javascript or heavy flash they struggle to read, but they are getting really clever at reading parts of that now

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I meant it still reads the link as "Newcastle" rather than "Scrap Car Newcastle" (i.e. it doesn't inherit information from the parent list-item - i.e. Scrap Car) but the point about the actual landing page being optimised for "scrap car Newcastle" being enough is a good one and seems to be the best approach.