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Had to explain -- well, I see Nick beat me to some of the stuff -- and then my own pet peeves: "You must have the most up-to-date version of this or that to view this site. Download it now?" And then a couple of minutes of download, install and "You must restart your computer for the changes to take affect."
That's a site I won't be back to visit.
If they are targeting just the Googlebot, it's SPAM.
Quote from mosley700 on Feb 7, 2003,
Cloaking seems to be SPAM in your eyes there, mosley700 :) Now that you are talking to a client...and there might be money in it, you want to know if it really *is* SPAM as you said before?
This kind of funny...and one of the main reasons that, when it comes to SEO, you should keep an open mind, and not let ethics, or silly notions cloud the decision making process.
Balance risk / reward, and consider the financial implication for you - explain the risk to the client, have them consider the options, then provide the service they want.
Simple as that, ya?
If you are not in very competitive markets, you will likely be fine. In less competitive markets, your site is less likely to be scrutinized. A penalty for cloaking will only follow manual scrutiny of your site by google.
In a competitive market, you must expect manual review of your site by google.
It all comes down to: will your site survive the manual reviews by google?
If you carefully, fairly and non-deceptively represent the flash site as html, you may (depending upon tha vagarities and fleeting whims of the google gods in all their infinite glory and wisdom) survive that scrutiny. But, if you succumb to temptation, if you start tweaking the html to improve rankings and traffic, if you go to far, your site could be sent to google hell.
You cannot hide from google that your site is cloaked if they focus manually on your site and ask that question. You gave them spider version of your site, you cannot hide the human version from them and it is easy for them to compare the two.
A site cannot survive long term in a competitive market with cloaked pages unless google accepts the site in occassional manual reviews.