SevenCubed, your advice is good and very rational... but not easy to deal with. Many site owners pay employees or contractors who work with them, or at a minimum take care of their families with money they earn from ad or affiliate revenue. I am one of these site owners.
Our genre is home improvement. We (a team of 4 owners) write about projects we perform (in great detail, with pictures, how-tos, and we answer questions on these projects). We have 1000 articles developed over 4 years. We are friends with other small publishers who also write about home improvement and frequently highlight each other's content. We have more than 20,000 incoming links to our site (many are home improvement blogs, but none that we have ever "asked for" are spammy - these are all real blogs with real authors writing real home improvement content).
Our rankings generally dropped 5-20 positions across the board. What has replaced us is larger sites with general information, rather than the niche, detailed information we provide. For example, we have an article on hardwood flooring that used to rank #3 for a series of terms. That article and its related articles took 40 hours to write after working the job for two weeks and taking numerous pictures. We marketed this article to several web masters who incorporated it into related content. It made sense to rank #3 (#1 and #2 were comparable, but very different articles). Numbers 4-7 aren't nearly as good as ours.
We follow Google's content and link development policies. We don't buy or sell links. However, we are small. We do not have big marketing budgets and until recently this was a second job/hobby for us. I relied on other smaller web masters to share our work with their readers and thereby build links that are signals to Google.
I want to stress this here. Every link we've EVER built has been from a REAL, well-spoke site with REAL content, not spam content, from REAL players actually doing home improvement in their homes or businesses. We never BOUGHT any links. I feel like because our site is small and not on the cover of the New York Times that Google is treating us like we are just spam. This is 100% not true to their goal.
This algo. update has decimated our business and has elevated other, seemingly large and irrelevant sites, into the rankings. It seems like google now favors large "general" articles over smaller "niche" articles in our domain. Presumably the logic is that the niche articles are less valuable. I have found this universally false in the niche we operate in.
I get the need to cull the spam - especially from the loser no-content sites that just pay a bunch of people who barely speak english to string together words. That's not us. And this is very hard to swallow.