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Google Webmaster Help: Nofollow Links

Google Webmaster Help released a new video today, in response to a user question.

I’m building links, not for SEO but to try and generate direct traffic, if these links are no-follow am I safe from getting any Google penalties? Asked another way, can no-follow links hurt my site?
—Timmy, UK

Host, Matt Cutts, assured users that in most cases, using the nofollow attribute would have no negative effect on your website’s rankings.

There are exceptions; if you or a user of your site are spamming on a large scale, or you are consistently reported for spamming behaviors, Google’s Webspam Team may take manual action against you, regardless of your use of the nofollow attribute. Cutts said, “If we see enough mass scale action that we consider it deceptive or manipulative we do reserve the right to take action.”

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