What action do you take when you receive an email from a webmaster of new sites asking to do a link exchange. Some people do participate thinking of reciprocal link exchange programs as a cheap and quick way to improve site rankings in Google and other search engines.
However, link exchange can work to your disadvantage and Google may even penalize you for this act.
According to Google, their algorithms can distinguish natural links from unnatural links. Only natural links add value and are helpful for indexing and ranking your site.
Google warns that linking to web spammers and "bad neighborhoods" can harm your site's indexing and ranking. But there is hope when a bad site links to your good site. Google says that links from bad sites won't harm your site, but they won't help your indexing or ranking.
Matt Cutt also wrote about sites that were completely removed from Google's index due to heavy reciprocal linkage.
Examples that might cause that include excessive reciprocal links, linking to spammy neighborhoods on the web, or link buying/selling.If you are heavily dependent on Google for your site traffic, think ten times befor you participate in some link exchange programs. Google has effectively pronounced the death of link exchange networks.