Google Webmaster Tools has a lot more to it than conventionally thought about. One of the most significant function performed by this tool is to pinpoint 404 errors on your site. This data when carefully studied will help increase valid in-bound links for sure. When you see a link from within your site that is listing a 404 error it needs to be rectified asap. Site's overall pagerank are affected by 404 errors.
Search Engine Watch has suggested a simple way of fixing the 404 error: Put in place a 301 redirect from the page that the person erroneously linked to, to the page they intended to link to. This is a great simple way to pick up link credit for those broken in bound links.
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Navneet Kaushal, CEO PageTraffic is a trusted authority in the search engine marketing industry. He is a featured author at Web Pro News, Search Newz, Website Notes, DevWebPro, SEO Article and Web Help Now among many others.
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With regard to the 404 reporting in the Google Webmaster Tools, do you know of any plans for Google to show us on what page the link to the 404 sits?