We get this question often too, but Matt Cutts answers it well enough here in this video. You can read the transcription below.
Today’s question comes from Chris in Poland. Chris asks, “Are site wide backlinks considered good or bad by Google or do they just count as one link from the whole domain?”
Matt Cutts’ Answer: That’s an excellent questions because, lets tackle it from both the algorithmic’s standpoint team and from the manual standpoint. On the algorithmic’s standpoint, typically, I’ve said before if we have like key words. The first key word counts some. The next key word counts a little bit but not as much. The third key word not as much. So, even if you do keyword stuff, even if you throw a ton of keywords, at some point, it becomes asymptotically diminishing returns and it doesn’t really help you anymore. You can imagine the same sort of thing. You know, if we see a link from a domain, we might count it once, but if we see fifty links from a domain, we still might choose to only count it once. So, on an algorithmic side, we do a pretty good job of compressing those links together.
But then, there’s also on the manual side. So, imagine that you have a Polish website and then you see a site wide link in English, talking about rent cheap apartments, you know. To a regular person, that looks pretty bad. So, certainly it does happen that you have site wide links, maybe have a blog roll or something like that, but if I were a manual webspace analyst, who were sort of doing an investigation, and we got a spam report. You’re an English site and you’ve got a site wide Polish link or something like that, or vice versa, it looks commercial or it looks off topic. Low quality or spammy, then that can effect the assessment on whether we want to trust the outgoing links on that site.
Hope that helps.