How much value do links from client sites retain when their sites are hosted on the same server as mine?
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I've seen web design companies' websites losing their organic traffic after Penguin updates for using a tactic like this.
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That's a shame. I have noticed losses in organic traffic
Do you think replacing these links with just straightforward would help?
Anything else I can try?
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Google doesn't believe these links are natural ones because they represent no value for a website visitor. From what I know the advice is to make them nofollow if you still want to keep it in the footer of the websites.
Personalty I would go with another solution - I would place a dofollow link on a single page like for example the "About" page if it contains details about the website also and not only the company or on an "Impressum" page if the website has one.