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This is the kind of story that makes me wake up in middle of the night screaming. Don't put all of your eggs in the Google basket is absolutely right, but it's still the biggest basket out there.
It is scary that somebody with (imho) not enough expertise in Google with identifying paid links was able to nuke a business in this way. Not cool, very worrying.
IMHO another example showing how the whole concept of penalties is wrong. Google should just discount the links and stop playing Sherlock Holmes.
Yes. And: "...the webspam team had taken manual action..."???? If this case is as simple as described, how manual could this have been. Nobody actually could have assessed the whole site and approved such a penalty, surely.
Well, Google employs "work at home" quality raters. Go figure.