Paid links are definitely not something that is valued high by Google. You can see in vast majority of articles devoted to link building that the most important factor is quality. It means the better websites post links to you, the higher is your rating. Certainly, this is not the only factor that determines SEO success, but it has real influence on your position in search results.
Google main aim and primary target is to provide visitors with best and most fitting results. This is their job. If Google will deliver poor results, no one will use this search engine and will stick to another. At this point websites with paid links are not good for Google. Imagine the situation - a website with poor content, but with some cash in budget can purchase many paid links and get leading positions in its niche. It's really good for this website, but is it good for Google? Definitely not. That's why Google's primary target is to determine website with truly unique and useful content.
However, this doesn't mean that all paid links are totally useless and are nothing just a waste of money. In some cases paid links are acceptable even here.
The first group of paid links acceptable by Google is so called 'no follow' links. This happens because in theory such links are totally useless as they bear no SEO benefits. You can hear different opinions to this question, but even if there's SEO benefit from them, it's very little. No let's clarify what a 'no follow' link is. When Google bot (or robot) reaches websites, it follows all links present. In case of ordinary link bot visits website and indexes it, even if it's already indexed.
The more times website is being indexed, the better position it gets as Google considers such websites worth attention (here's the following statement is used: if website is quoted many times, it contains valuable content). No follow links tell search engine bot to ignore them. So these links are valuable only in terms of human traffic (people see this link and click it).
Some 'do follow' links are acceptable too. As Matt Cutts, who's not the least person in Google, states, the system is worried about "paid links that flow PageRank and attempt to game Google's rankings". What does this statement mean for us? We can tell 3 criteria that make a paid link not good for Google. First, it should be 'do follow' link, it should affect your PageRank and, finally, Google must consider it manipulative (the one that "attempts to game").
Most probably you would like to know how to determine whether the link is manipulative or no. Matt Cutts made an explanation to his "attempt to game Google's ratings". Their search robot uses algorithm to distinguish "good" paid links from "bad" ones. The most important term here is relevancy. For example, a website that contains many paid links for various websites (like tourism, gambling, dating websites, etc) most probably won't be considered a quality one by Google and thus don't even expect links to be indexed. To this group of links you should also add "low quality links" - the ones that come from spam websites or websites with illegal content. Positive effect from these is under question.
As you can see, "bad" paid links Google are those that mess with PageRank and are irrelevant. Does that mean if you get paid links from relevant websites that also flow PageRank they still will be ok? Most probably yes. This means if you're ready to pay for links, do this smart. Do not select low quality websites that accept each and every enquiry. There's also another way to examine directory's quality. Open any category and look what websites are there. Click several links. If you see or suspect there are many spammy sites listed, find another directory as this one won't be useful for you. Only directories that contain quality, both old and new websites get virtual "stamp of quality" from Google.
Now let's talk about free directories. Today there are so many free directory websites that provide submissions for all (or almost all) websites offered, but are they helpful? Unfortunately, not all of them will increase your rating. It's a real privilege to be listed in quality directories. For example, Yahoo directory, but it costs $299 for inclusion. Make a search for quality but free web directories - they are worth it.
Summarizing all that has been said, Google will be ok with your paid links even if they flow PageRank in case they are in a directory where
- Links are more or less relevant to each other
- Poor quality websites are not listed
- Not all links accepted
Feel free to buy links! The only thing you need is to make some extra search and selection of quality links that fit all criteria stated above. Do not hurry up to part with your hard earned cash and find those directories that will really help you to make your website more valuable.
Try to determine niche directories as they are usually valued high. If you are about to buy listing in general directory, make sure it has a subdirectory that tightly matches your website theme. Then select several websites randomly and check whether they are well made and provide quality content. If you browse websites in directory listings and see there popular websites or brand names, this is a good sign.
If a directory offers paid immediate add, don't use it. Such directories are considered of poor quality by Google, so they won't give you any benefit. Actually, if submission is made immediately, no quality check is performed. Only manual approval implies human examination of an applicant.
Buying links right is a real talent. Thoughtful and rational approach to this will help you not to waste your money, but get paid listings that still provide SEO benefits. Certainly, paid links are not the only way to build link base, so use other methods as article submission cervices or link requests. If you find quality paid directories, especially niche ones, it may be just right time to open your wallet and invest some funds into your future success.