A link exchange is the same thing as reciprocal linking.
Simply put, two sites agree to exchange links by each site adding a link to the other site.
There are various reasons that sites exchange links. From the earliest days when search engines started to consider link popularity in their rankings, link exchanges became a popular tool to get more linkage. Of course, once Google PageRank became important, link exchanges became an even more popular form of link development.
Of course, it's common for sites to find related sites with whom to exchange links purely for the advertising and traffic potential that the arrangement offers.
Over the years, some webmasters have tried to create "mass" link exchanges in which multiple sites agree to link to all the other sites. These link farms almost inevitably collapse due to search engine penalties or lack of reciprocation by some participants.
Today, some SEO experts question the value of exchanged links, believing that search engines devalue these links because they appear to represent an agreement between the sites. Others feel that these reciprocated links are perfectly natural and an essential part of how the Web works.
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