Linking To Other Sites
From Joomla! Documentation
Linking to other sites
Building links to other websites has always been an important part of search engine optimisation and is one of the most abused ways of attempting to gain prominence in search listings. As a result, search engines have cracked down on this kind of unnatural activity, heavily penalising websites which try to artificially increase their search engine rankings by building large volumes of reciprocal links with websites over a short period of time. In an attempt to address this problem, search engines regularly update their algorithms, and penalise any sites they find to be operating outside their best practice guidelines (See Google Updates for more information).
While best practice recommendations change frequently, the 'rule of thumb' is to use common sense. Link building should be a natural process, and the websites which you link to, or that link to your website, should be related in some way to your site.
Any links you have on your website which lead to an external resource should clearly inform your visitors what they are linking to without being spammy - for example Joomla! Documentation Project would be a clear indication that the link is directing people to the homepage of the Joomla! Documentation Project. If the link were to be written as here it is not so clear what page you might be visiting - and as you haven't used any keywords from the landing page, their site will not be getting the best benefit from your link.
The words which you use within the hyperlink are known as the 'anchor text' - and ideally these should contain information about the page to which you are linking, even better if these words feature in the URL as well. An example where this is often done poorly on Joomla! websites is where 'Read more' links display Read More rather than the title of the article, in the hyperlinked text. Joomla 3.x and above has implemented the ability to include the article title in the read more tag, which is an improvement.
Another common anchor text which doesn't help the user or search engine 'bots' is for content to only include a link on the word here - this doesn't tell you (or search engine 'bots') anything about the content on the page they are being directed to, unless they have read and understood the surrounding text. Using a well-written anchor text also gives the person visiting your site confidence in the link they are clicking - they know what to expect when visiting the link, so it may be more likely that they do so.
This is true for both internal links (if you're linking to another page or area on your website) and also on external links to other sites.
A word of warning
It is important to note that with recent updates to Google's algorithms (named Panda, and more recently Penguin), sites with unnatural linking profiles may be down-ranked in search engine positions. One of the main factors in the Penguin update targeted websites which had a large amount of its traffic coming from keyword-stuffed anchor text on hyperlinks from low-value websites. Keep your links relevant, appropriate and relating to what you are linking to.
Where possible, it's also wise to regularly check that your links are still valid. The user experience is tainted somewhat if 50% of the links on your site result in a 404 - Page Not Found error. There are tools available online which allow you to check broken links from your site - it is sensible to check this occasionally and correct any links which no longer work.
In short, use links appropriately, and build links to your site in an organic way. Natural link building adds value to your website for your visitors, and brings visitors to your site who are interested in your content. The user experience is improved greatly when you link to any article you may be referencing (whether internal or external), and the Search Engines generally recognise this and favour it.