Niall Kennedy has one of the most thorough write-ups on why search spam exists with his article "The Spam Farms of the Social Web." The article explains how he stumbled upon a spam site, researched the site to death, guesstimates on how much money they can make and services that help you make it rank well. This includes a look at blogs, digg, del.icio.us, other social sites, link building tactics, directory inclusion, content writing, and more.
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