A few years ago, building and exchanging links was a very effective process for building reputation and enhancing your search engine results. 

Its not that it doesn't still work today to some extent, but it is yet another area that has been abused by the masses and in doing so has contributed to its downfall.  It has led to the search engines enhancing their algorithms and filters to analyze and inspect every angle of every link - is it reciprocated? where is it located? how relevant is it? when did it get added? what's the anchor text?  what's the page title?  how many other sites link to this site with this same anchor text?  how many other links are on this page? who else do they link to? and so on.  

But you see the irony is that contextual links between sites are more important than ever.  If a link has passed the cavity search that Google and others inflict on it, then it will help boost your reputation which will in turn boost your rankings.  The problem is that the traditional "link exchange" program is either too hard, too time-consuming, too risky, or too ineffective. 

Its time to evolve your approach (if you haven't already done so by now) and your mindset.

Sometimes a different approach requires us to change our nomenclature.  No matter how much we redefine the activities that occur with "Link Building", it still always makes people think of link exchange or reciprocating links.  Lately, we've simply been using "Off-Site Optimisation" to describe the set of activities that we perform to enhance a client's popularity and reputation for their web site.  It seems to help.

Mostly, our "off-site optimisation" involves activities that create links based on content - articles, blogs, comments, social media, and creating "link bait" to name a few. 

Approaching the owners of sites relevant to our client's is still part of our process - but to establish or be a part of a "topical community" more than simply generating links for linking sake.  This approach will become increasingly important as personalisation starts to become more main stream - the search engines need to understand where your site "fits" within the various online ecosystems so that your site is established as relevant to your target audience when they search.

So you see "Link Building" is dead... at least the term and the outdated practices that it implies should be abandoned; but "off-site optimisation" makes a real difference and will become increasingly important for the foreseeable future.