@itsjustme2, an interesting topic!

Firstly, I think not all paid links are bad. If you find a site where your target audience hangs out and you buy a link to send you relevant traffic (nofollow, ahem ahem) or if you pay for membership at your local Chamber of Commerce or various Associations and you happen to get a link on their website as a bonus, it's ok.

The problem with paid links is in the footprint they create. You know the famous Matt Cutts' video where he half-jokingly says that Google is looking at how much value is exchanged for a link and that buying someone a modest dinner should keep you within the Webmaster Guidelines while buying the chap an 18-course feast might get you in a pickle (no culinary pun intended).

Unless by a stroke of bad luck you happen to dine at the same restaurant where Matt is having his lunch, he's got no way of finding out that you've bought a blogger a $500 hamburger hoping he might link to you.

The problem is that if this blogger has allowed you to incentivise him in such manner, he probably has dozens of other similar "relationships"... read: dozens of other paid links.

Google certainly can detect linkspam. There's a patent called "Ranking based on reference context":
[seobythesea.com...]

There's also link velocity to look at, plus link churn, e.g. when unscrupulous SEOs try to replenish the anchor texts to keep them at a certain level as older paid links expire, plus many other factors.

If you can work out a routine that doesn't leave a footprint, you'll probably do very well, although I'd argue that in most niches you don't really need to pay for links (in the traditional sense of the term) to get high rankings.

I still see respectable (ha ha) agencies pestering bloggers for a chance to contribute "100% original blog posts at least 500 words in length" but it seems this blogger outreach thing is going out of fashion. People who want to buy links are trying to explore types of websites that they didn't consider previously.

And to pick up on your $10,000 viral video example, if someone had to spend 10K on a video and then spend more to get bloggers to link, then it has really defied its purpose. If the video got the right ingredients, it will provoke the need to share without the sharers feeling they've done you a favour.

paid links and footprints....

I agree that many link building or development projects do leave footprints...so it's tough for newbees to deal with.

Still, after close to 20 years in the biz, it's been my experience that the biz has changed drastically over the past 4 years.

when I looked at my link profile in depth, I could find a consistent set of links, freely provided by visitors during the early years....over the past 4 years, those links have dried up. I did have over 1/4 of my pages linked to from Pinterest, for example. However, they are all nofollow links, and then they steal or borrow your pictures for their own profit. There's no traffic from Pinterest.

after never even thinking about link development, because of the previously open nature of linking out, and recently slogging through the Panda and Penguin traps (got hit by a wave of Chinese spam and couldn't figure out what the heck was wrong with my site until Cutts admitted negative SEO works and you have to take a machete to your site's link profile) my site's back to clean as a whistle for a year, but no natural links....

Maybe most of the natural links provided today come from the so called link-baiting techniques popular among bloggers. I've never "blogged" per se, collecting a diary of old articles lined up week by week, month by month, year by year.

Rather, I've written original, evergreen content supplemented with oroginal ictures, charts, graphs and videos. After realizing how, at least my corner of the internet changed, I've started to look at major SEO firms and what they say. I've looked at the spammer's techniques (again it's all over the freelance sites) and wondering how it's done.

Any hints from WebmasterWorld readers would be appreciated.

until Cutts admitted negative SEO works

Not exactly. More likely Panda, as you stated:

and recently slogging through the Panda

So if you got hit by Panda then you must seriously entertain the idea that perhaps your problem was Panda (aggressive on-page SEO) and that once that was cleared up you were ranking where you were supposed to rank, given that you have not done anything to cultivate links.

It's not all spam and spamming. Consider this, the biggest growth in the SEO industry has been in detoxifying links, not building links but taking them down. That in itself is evidence that contradicts the appearance that spammy techniques are the norm. To the contrary. A lot of it has been caught out, both on page (as you found out) and off page.

Here's something you could try (no idea how successful it will be, I'm about to try it myself): run a tightly-focused Google Display Ads campaign or two and look at where Google places the ads.

As the sites are obviously monetised, they may be open to commercial relationships. They could also be crud, but Google give a lot of filtering options now and I'm hopeful that there will be some useful sites as well as the MFA ones.

Another plus point I can think of is that you have another metric when assessing the site, because you have ad impression data = traffic.

So much as I have read, buying links are not such a good idea. Reciprocal linking with relevancy is the preferred method when getting links. But trying to convince someone with a pagerank of 4 to link back to your site that has a 0 is almost impossible.

I would just go ahead and focus on creating good content with a lot of relevant keywords. Instead of putting money into buying links, why not buy some relevant content. Simply use a good 'ol' blogging platform.

But trying to convince someone with a pagerank of 4 to link back to your site that has a 0 is almost impossible

If a link is relevant then neither party will think about PR.
RELEVANT links are links for people NOT bots.

Right, but pagerank is a good indication of relevancy or else Google would do away with the concept altogether. If you had a site that had a pr of 5 would you reciprocate and link back to a website with a pr of 0 if they linked to one of your articles. I guess it would depend on a number of factors. Such as how well the website looked and functioned, the number and type of other links already on the site...etc...etc...