Google Webmaster Help has uploaded an interesting video, targeting on the use of spammy domains.
Matt Cutts is giving a video answer to the question "Can I buy a domain that used to have spam on it and still rank? How can I reset the SEO of that domain?"
The answer to the question is yes, but Matt explains the possibilities of two penalties; on the manual side and on the algorithmic side. In case of a manual penalty, you can fix the spam and submit a request for reconsideration. If it's an algorithmic penalty, you will have to wait till the time algorithm picks up on the changes. The good thing with manual spam is that it has a time out, which means the penalty will auto-expire if you clean up the spam.
Matt also told that if the spam is very aggressive, it is difficult to recover from the penalty without cleaning it all up. It is not impossible but you will have to start with negative ranking, going below the ground to get back to the ground level. However, you will have to document all the steps you took in detail, while submitting a reconsideration request.
Matt said that, in case of a severely spammed domain name, he would have probably not bought it. He would have started with a clean and fresh domain.
He further revealed that a number of spammers spam and burn the domain name, and when caught, they try to sell in on a forum. Matt said, "you don’t want to be the sucker who gets stuck with that bad domain name".
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