When it comes to nofollow links and their impact on site's rankings, many webmasters are still looking for an answer. The Head of Spam Search in Google, Matt Cutts has released the Webmaster Video addressing the same question.
The video is in response to a query by Tubby Timmy: "I’m building links, not for SEO but to try and generate direct traffic, if these links are no-follow am I safe from getting any Google penalties? Asked another way, can no-follow links hurt my site?”
Cutts said that nofollow links cannot hurt the website, however, in some weird cases it can. If you are leaving a comment on every blog post (even if the links are nofollow) and people are noticing you, some are getting annoyed, and spam report about you, Google might take a manual spam action.
Citing an example of Anon.tc on TechCrunch, Cutts said that the guy used to make nonsensical comments, which clearly showed that he wanted to divert the traffic.
Cutts further added that even if the links passed were nofollow, if Google sees a mass-scale action that is manupulative or deceptive, it might take an action. He also said that nofollow links in most part are dropped out of the link graph of Google algorithm while crawling the web and should not affect your ranking.
Cutts concluded that as long as one is doing regular direct traffic building without annoying the web, he will be in a good shape.Matt Cutts on Impact of Nofollow Links on the Site Ranking!,