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What are nofollow links
Simply put these links contain an HTML tag "nofollow". It is like rel = "nofollow".
Example: <a rel="nofollow" href="http://www.example.com/">Anchor Text</a>
What is this for
The nofollow tag is for the spiders or crawlers of the search engines. To understand this one must know how Search engine spiders/crawlers/bots really work. They surf the web by moving from one page to another by the links present on that page. No they don't just jump from one page to another following the links, the bots gather the links present on all the pages they crawl in a day into a database. Then one by one they crawl those links. Another thing to notice is how search engines rank different pages and websites and show them in their SERPS(Search Engine Result Pages). They rank a page or site according to the number of quality backlinks pointing towards it. The more a site has quality backlinks pointing to it, the more chances it has to rank higher in SERPS.
What it does (How does it work)
So far we have seen that the nofollow tag is for the search engine bots. So how does it help those bots?
Well, I just told you how bots/crawlers crawl a page and how they rank pages, obviously they rank and crawl sites from the backlinks pointing to it. But if a link has nofollow tag embedded into it then there is no chance that it will be counted as a backlink to the page it is pointing to as search engine bots totally ignore a link with nofollow once they come across the nofollow tag which is embedded into the link's HTML.
Why still get nofollow backlinks
According to the latest SEO trends and search engine behavior watch it has been proved that nofollow links have some value, although not as much as the normal back links but a 1000 nofollow back-links are no worse than 50 normal back-links. Am I contradicting the statements about nofollow links I gave above? the answer is a big no. How come it is a no? Well above I told you what is meant be nofollow officially and this is how some Google spokesperson would define it. But in this passage I am giving you a bit of insight on them from a user's perspective. This is the finding of real SEO analysts and any search engine won't admit it but nofollow links do have some value.
There is nothing like a true quality backlink, but if you can't get enough backlinks, go for the nofollow ones and if you can get a few of them they will definitely help improve your search engine rankings.