Most affiliates will nofollow or otherwise block your link anyway.
For the few who don't - think about whether they are 'reputable referers', ask yourself the 'would I show these to my mother' type of question ;)
If not, yep, go for the nofollow.
If they are a quality website, I wouldn't insist on it while there are no problems - you can always ask for it later.

There have been reports of people who say their incoming aff links have been devalued, but they are pretty rare.

I see roughly 50% of affiliates using nofollow. However, doesn't the advice of using nofollow contradict what is currently happening? Other posts seem to say that use of nofollow is discouraged.

@robert76

Other posts seem to say that use of nofollow is discouraged.

I believe that is for a different reason; in particular, that nofollow should not be used for sculpting page rank (since the page rank "vanishes" from nofollow links on a page, instead of being funneled into the followed links on a page).

I am interested in whether google might penalize my site by having inbound affiliate links being followed, since they might see me as trying to manipulate page rank.

I base this on whatever information we have regarding overstock's affiliate linking policy, which has just received a lot of attention lately.

I am interested in whether google might penalize my site by having inbound affiliate links being followed, since they might see me as trying to manipulate page rank.

Bear in mind that you have minimal control over what other people put on their pages.
Overstock was a special situation where they were literally saying 'put these links on your pages'.
You (presumably) are saying 'I will pay x% cpa. Here is the method for doing it'
Its a subtle but significant difference.
I do not think 'traditional affiliate merchants' need to worry about the overstock penalty.

I have a pet peeve about the Overstock affair and how much FUD the Wall Street Journal and Google left uncorrected. Those links that were publicized (along with the requests for anchor text) were not a requirement of the discount program. in other words, there was no "quid pro quo".

Dave Harry is the SEO consultant who was credited in the original WSJ article. He is in a unique position because he exchanged a lot of information with the various parties before the article was published

He posts here under his widely used screen name, thegypsy. Dave confirmed that the penalty did not occur because of any details that WebmasterWorld published. Instead, there was another Overstock activity that caused the Google penalty, but it has been unreported.

I can confirm this, but I cannot give details as it was given to me <off the record>. And I can also confirm that the other item they were caught doing is most CERTAINLY in violation of the Google guidelines.

I was also confused somewhat as there was no 'smoking gun' with the EDU stuff. I've gotten clarification and most certainly ANY website would have been nuked if caught doing what they were. I wish I could tell you more, but I respect my sources.

[webmasterworld.com...]

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Sorry for that off-topic diversion - we were talking about affiliate links.

Affiliates are not linking to give an unbiased "editorial" citation to their program's home site. There is compensation involved, so the links should not be passing any equity - whether you accomplish that through a nofollow or a scripted solution. At least that's what I get when I think with my Google brain filter turned on.

You are supposed to no-follow affiliate links because these are sort of similar to paid links - i.e. you get compensated for redirecting traffic in this way.

If there is any penalty (and I don't know if there is), it will be applied to affiliate's site for a paid link.

The receiving merchant has nothing to worry about at all.

Part of the reason Amazon.com ranks so well is because there are literally thousands and thousands of affiliate links pointing to their site, where the affiliate has forgotten to apply no-follow. And when a product is popular and loads of affiliates link to them and forget to no-follow their links, why Amazon hits the #1 spot!

So what does the jury say about affiliate links? I did not see a general agreement.

I am an affiliate site. I masked my affiliate links and disallow them with my robots.txt, but was told by a SEO expert I am bleeding off a lot of link juice - and I have over 3000 blue widgets - because I am not placing a no follow on my outbound affiliate links.

And recently have noticed that the merchants with the real blue widgets are outranking me. Am I passing all my link juice to them?

Is it a good idea for affiliate sites to place no follow on outbound affiliate links? Does Google frown on that? Or should I unmask my affiliate links and then place a no follow on the outbound affiliate links?

I am wondering what will be best?

Using a nofollow will not change the "PR bleed" situation. If the link is there, it takes a share. Nofollow links used to be removed from the equation that divides total PR on the page, but Google changed that a while ago.

the merchants with the real blue widgets are outranking me. Am I passing all my link juice to them?

Only if you are linking to them without using some kind of script masking or nofollow.

Tedster, thank you...and I am

linking to them without using some kind of script masking or nofollow

I have been for years!

So what should I do? Should I place a nofollow? And, will it make a difference according to your first statement?

Using a nofollow will not change the "PR bleed" situation. If the link is there, it takes a share. Nofollow links used to be removed from the equation that divides total PR on the page, but Google changed that a while ago.

I do not really understand what you said there. I know you are busy, but can you enlighten a grasshopper?

What is it you are trying to accomplish? It's not likely you're going to outrank the merchant.

FWIW, as a general rule I cloak and nofollow all affiliate links.

Yeah, Tedster. Please explain your reponse:

"Using a nofollow will not change the "PR bleed" situation. If the link is there, it takes a share. Nofollow links used to be removed from the equation that divides total PR on the page, but Google changed that a while ago. "

Again I do have an paid link on every article on my site with an rel="nofollow". Are you saying that this nofollow link is useless now from the eyes of Google?
Please advice.

nutmeg,

What is it you are trying to accomplish? It's not likely you're going to outrank the merchant.

I am trying to accomplish good SEO, and where I can stop the leaks, I do. I thought Google looked at affiliate nofollow as rank manipulation.

As for outranking merchants, I agree. In some cases I do since I am a unique niche for blue widgets. Other widget sites do the same thing, but they refer a shoppers to pink, blue, yellow widget merchants. And they rank well in Google. Maybe a vertical search engine? I am just referring blue widgets.

FWIW, as a general rule I cloak and nofollow all affiliate links.

Thank you!

I always wondered what google thinks of sites that dont have any nofollow at all, do you think Google categorize sites like that?

Sites that use them a bit (Signal to Google that SEOs are at work so we (Google)have to be careful with them)
Sites that dont use them at all. (Signal that they are noobs, how can they haven`t heard of this they must be clueless and probably dont even know what Blackhat is, so leave them alone for now)

Just wondering...

I thought Google looked at affiliate nofollow as rank manipulation.

Not my understanding at all.

The issue is how much PR circulates back through your site from the other, regular links on the page. Here's the article from Matt Cutts that explains the 2008 change in PageRank calculation when there are nofollow links on the page

So what happens when you have a page with "ten PageRank points" and ten outgoing links, and five of those links are nofollowed? Let's leave aside the decay factor to focus on the core part of the question.

Originally, the five links without nofollow would have flowed two points of PageRank each (in essence, the nofollowed links didn't count toward the denominator when dividing PageRank by the outdegree of the page). More than a year ago, Google changed how the PageRank flows so that the five links without nofollow would flow one point of PageRank each.

PageRank Sculpting [mattcutts.com]

Sites that dont use them at all. (Signal that they are noobs, how can they haven`t heard of this they must be clueless and probably dont even know what Blackhat is, so leave them alone for now)

hey, I am that remark. LOL! And what makes it worse, I have been doing my own SEO for years!

Not my understanding at all.

Just made the changes. Thank you!

The issue is how much PR circulates back through your site from the other, regular links on the page. Here's the article from Matt Cutts that explains the 2008 change in PageRank calculation when there are nofollow links on the page

Reading it now. Thank you, Tedster!