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The aim of Google is to find the sites that are most popular among the web community. Backlinks indicate a popular site because other webmasters liked the site so much they went to the trouble of linking to it.
But traffic stats indicate a popular site because lots of people are visiting it - ie. high traffic is not just an indication of a popular site, it's proof the site is popular.
A site that used to be popular but is no longer will still have lots of backlinks... it will still show up as popular in any algo which depends on backlinks (and consequentially will retain residual popularity because of continuing high rankings in Google)... but if the overall traffic has dropped away regardless of numbers of backlinks, surely the site isn't so popular anymore and shouldn't necessarily keep appearing so high up in the SERPS?
Combined use of traffic stats with backlinks will help to stem the continual rise of 'link inflation'.
So... is it possible that Google might be planning to incorporate data from Alexa into its algo? What does everyone think?
Is 'an in-house, accurate traffic rank' likely to be factored in to the algo? Because my contention is without such a measure, link inflation will never end and in ten years time, if the web as we know it still exists, new sites with small budgets won't stand a chance.
Alexa's data is far less representative, and though the consensus is that it may provide reasonable ratings for the top say 1,000 sites if you downgrade the Korean sites which have a demographic skew, it gets very flakey from there.
Google's key utility is to find content that you may not usually find - far more than the first 1,000 sites. Using Alexa data would kill it. Their toolbar provides them far superior intelligence, as far as toolbars ever can. I presume that toolbar usage has a strong skew towards webmasters, technical people who spend a fair bit of time on the web and like widgets, and people with powerful enough workstations and connection speeds to be able to use toolbars without noticeable degradation to performance.
I would not want to see Google rankings to be influenced by the browsing habits of such a group. I would prefer to see them influenced by the browsing behaviour of casual, "everyman" type users.