A HTML code is used to turn an Anchor Text into a link. An example of Anchor Text with the HTMl code is given below :-
<a href = "http://smmo-startmakingmoneyonline.blogspot.com/">Start Making Money Online</a>
The text 'Start Making money Online' is the Anchor Text and the rest is the code which is pointing to my home page. This is the basic code but there can be other attributes added inside the code like rel="nofollow"(used to stop search engines from following the link) or target="_blank" (used to open the link in a new window) depending on the purpose.
Why is it Important?
An Anchor Text appears much more suited to the surrounding text then the URL which looks rather odd. An Anchor Text also has a better ability to expresses the subject of the page to which it is linking to in a short and comprehensive manner if used properly.
Search engines take anchor text as one of the key parameter to display the search results. Anchor text is weighted (ranked) highly in search engine algorithms, because the linked text is usually relevant to the landing page. The objective of search engines is to provide highly relevant search results; this is where anchor text helps, as the tendency was, more often than not, to hyperlink words relevant to the landing page.
Webmasters or blog owners may use anchor text to procure high results in search engine results pages. Google's Webmaster Tools facilitate this optimization by letting website owners view the most common words in anchor text linking to their site.
Choosing the Anchor Text
Anchor Text is one of the great optimization techniques that is to be taken care of while linking your pages may it be with internal or external links.
Choose the keyword phrase for which you want to optimize or rank well in search engine results pages as your Anchor Text. Say for example - you want to optimize a particular post for the keyword phrase "blog promotion", then choose "blog promotion" and its variations as your Anchor Text for the links pointing to that page - simple! A wrong idea is to use something like "To know how to promote your blog, click here". They use 'click here' or 'here' as the anchor text to the post they want their readers to visit. It's absolutely a wrong idea and doesn't do any good.
Links to a page can come in basically two ways - the first is through organic ways that is when somebody likes your blog or a particular post in your blog he puts a link in his blog pointing to your blog or to that post using an Anchor Text of his choice so these links contain a variation of Anchor Text which can not be manipulated and are considered as natural - and the second way to get links is by adopting various means like leaving blog comments, leaving forum comments etc whose Anchor Text can be manipulated to contain the keywords of our choice. Now if you make too many links with the same Anchor Text then Google and also many other search engines can detect and consider links with the same Anchor Text from multiple sources as spam and being made by humans to manipulate search engine results artificially so penalizes those sites. So making links with the Anchor Text as variations of the keywords you want to optimize your blog for will just make the links look natural to search engines and you will escape the penalty.
For example, some variations of the Anchor Text "blog promotion" can be "promoting a blog", "tips on blog promotion", "how to promote a blog" etc. There can be thousands of variations possible limited only by your imagination. Just choose a few and start using them as Anchor Text to get back links to your blog or site.
If you have difficulty in making variations you can use the Google AdWords Keyword Tool which is a free service. Just type in the keyword phrase in the box, fill in the captcha and press "Get keyword ideas" tab to obtain many variations. Choose those containing your keywords.
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