When I started this blog I was completely mystified by the difference between follow and no follow links. Here is an explanation of what they are, and when you should use each.
What is a Follow Link?
Follow links are your bog standard, normal links. You create them in the usual way:
They tell the world that you like and trust the link, and aren't ashamed who knows it!
What is a No Follow Link?
No Follow links, as a concept, date back to 2005 when Matt Cutts of Google and Jason Shellen of Blogger joined forces to combat spam in blog comments. Blogger has a tick box to make a link no follow, or you can use the rel attribute like so:
No Follow links suggest to the world that you're not quite sure about the link. You're happy to send your readers there, but you're not happy for all the little search engine bots to connect the two of you - your page ranking won't have any impact on the ranking of the website you're linking to.
Think of it kind of like accepting a friend request on Facebook, but then altering your privacy settings so they can't see all of your posts. On the face of it you're best buddies, but scratch the surface and it's clear you're not happy to share everything them.
You can make all the links in a post no follow by using this html:
When Should You Use a No Follow Link?
Originally, making a link no follow was a way of reducing spam - Wordpress, for example, automatically makes all links in comments no follow. By 2010 however the no follow attribute was being repurposed as a way of marking a link as paid for, the idea being that you shouldn't be able to pay to increase your page rank.
Google has recently issued guidance for bloggers which states that any links which come about because of sponsored posts, or items sent in exchange for review should be no follow because 'these links didn’t come about organically (i.e., the links wouldn’t exist if the company hadn’t offered to provide a free good or service in exchange for a link).'
The question marks represent instances where the decision comes down to your own judgement - would you have included this link off your own back? Google's own position can often be contradictory; you should add value to your article and link to relevant sites, but you shouldn't link to anything which might benefit you, irrespective of whether or not those sites are the same. In fact, Google's various websites have often fallen foul of their own no follow policies, although unsurprisingly it made little or no impact on their page ranking or position in search results...
Whatever you do, don't make all your outbound links no follow. You'll be penalised for that too!
What Happens If I Refuse to No Follow?
Making a paid link no follow is a guideline not a law - you're not going to find the police banging on your door because you haven't done it. Instead Google will sanction you if they discover you haven't followed their advice. This can happen to big companies - Interflora were removed from Google search results in 2013 after sending bloggers flowers in return for follow links - and small bloggers too.
The penalty placed on your website can last anywhere from 30 days to forever if you make no attempt to clean up your links. If you do go through and sort out your outbound links, and submit a reconsideration request, you can be back to normal in a matter of weeks. Check out this article from hobo-web for more on Google penalties.
Why Would I Follow Anyway?
If somebody contacts you and wants a link for PR (public relations) purposes, they're likely to be happy with it being no follow. The follow link would be a risk to them too (remember the Interflora example), and they're mostly interested in increasing their brand recognition and using your recommendation to encourage people to visit their website.
If they want the link for SEO (search engine optimisation) purposes, they're unlikely to settle for a no follow link. No follow won't give their site any benefit in terms of page rank or search engine results.
In this case, you really need to weigh up how big of a threat a Google penalty is to your blog. Where does your traffic come from? If the bulk of it comes from Google, the risk of a penalty is big. If your traffic comes from elsewhere, it doesn't matter as much. Similarly, it depends what you're being offered in return for the follow link - follow links usually mean bigger payments, so if you need money that may well override any consideration of how Google will view the transaction.