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I'm a believer in subfolder > subdomain

Google still internally values / devalues the links they discovered based on their algos. I think in 2011, when penalties and WMT notifications started to pop up, many SEOs forgot that Google still does a good amount of this internally.  They'll react when it's egregious. If you see pure spam in your backlink profile, Google suggests you go ahead and disavow. If you see otherwise good domains that are irrelevant (which it sounds like you do), then there's no reason to panic until Google misreads the intent and thinks you're trying to game the algorithm.  If you're not doing that, you're probably in fine shape continuing to build good relevant links and creating the most relevant and valuable website possible. egregious

That presentation is from 2006.  Is it still relevant?

Hi Robert, Thanks for your prompt response. Then what do you think the reason for my sites drop in rankings when Panda 4.2 was updated. I have attached my index status as well as Organic Traffic. Panda 4.2 started on July 17th and on July 19th my index status increased and from July 19th my organic traffic went down. Any advice on this. pRs1jfs.png hoy6uIj.png

Thanks Dmitrii, your thread helped me a lot to understand.