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Depends on the SE's definition of fair and maybe the SERP viewers idea?
How do you actually know they are buying pagerank, lots of PR8/9 sites sell advertising space? Good branding being linked to from a high PR site too ;)
IMHO I'd worry less about fairness and if the G algo kicks the site out, you have an answer :)
If Site X, regardless of its PR, has a text link ad for sale, and you have the funds to pay for that advertisement, and expending your ad dollars on such a text link ad makes good business sense to you, it's ok. Of course, that's true irrespective of whether your competitor is or is not purchasing a text based ad from Site X.
Meanwhile you can start (buying) links from the likes of Yahoo.
Google even describes getting listed in Yahoo on their following page: [google.com...]
Some people still see an ad/link on another site as a way to advertise and possibly bring in more traffic or increase awareness of their site or product.
What's "not fair" is the people who see these links as nothing but a way to manipulate their PR.
If they're buying space on an unrelated site, than they're short changing themselves. It's much more effective to buy space on a related site... which would be advertising to a more friendly market -and- serve to help PR.
Buy text ads. It's been a good exploit for months now.
To quote toolman (Jan update thread [webmasterworld.com])
"Once again buying text links wins the game."
We all seem to think that the search engines are there to return relevant search results. Wrong. if they did this they'd be like Pets.com (dead).
The search engines have to make money and that means that they allow things like advertising on their pages. It also means that undertaking large complex development projects like the one that would be required to determine relevancy of pages to the Nth degree will not be done unless there are ROI implications.
If people stopped using Google then they might consider that their "search results" were a problem. However it is mainly people trying to place their products that have an issue with Google. Hence the growth in links as a currency.
I see no sign of this stopping soon. Basically its a case of (a) join in or (b) just concentrate on making your business the best it can be and working out new ways to get customers in.
Getting some Page Rank is a great selling point for the site selling the ads. Don't forget this is business not a game of tag. I hope the new Algo keeps it in.
The beneifts of being #1 SERP must be more than the cost of the adlinks (or they'd not do it). Your action is already costed and worked out then... YOU can get to be #1 by paying for the adlinks, and come out in profit.
A little off topic. I used the exact same logic for adwords. I gave it a try and just can not see how the are making money. I tried it as an affilaite and I would have to convert close to 50% to break even. The people with the top spots must be the suppliers with much cheaper product cost. I'm starting to believe buying text link advertisements is the way to go.