I came across the SEO Checklist blog when looking for an SEO checker to examine the outbound links from a site. I was very interested in the article Does Linking to Spam Sites Hurt Your Rankings?

Due to the recent parasitic spam-attacks that we discovered last year on our clients' sites, (see the press releases) the answer to this question is not no, as Mariella Moon concludes, but a definite YES.

We have comprehensive proof that our clients' search engine positions suffered as a result - one in particular lost all placements in Yahoo, which recovered immediately after removing the inserted links (well the next time there was an update after a crawler visit). Google positions also improved, as did the Toolbar Page Rank of the site.

Additionally, another one of our clients had a temporary problem with spam comments after installing a blog, and that too hit rankings in Google - whilst Google was obviously clever enough to realise what was going on, the site ranked several places lower than it did when the links were not there.

There is an engine algorithm difference here - Yahoo penalised the sites much more than Google. On the other hand that makes these issues harder to find; a rapid drop out of Yahoo causes an investigation, whereas a struggle to get on the first page of Google is not easy in the first place and it is easy to assume that it is another factor that is causing it, not some hidden links you are not aware of.