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The best solution would be to have country domains primarily because regional search engines are more likely to include them
the thing that I am worried about is the fact that every page of each site will have a link to every other site. Will they all be penalized for heavy linking?
A 3rd idea would be to make subdomains. Google also loves these at present. As for local SE's at present google has an 80% market share so I would be concentrating on what G likes
We use the following structure
www.domain.com/ (English)
www.domain.com/es (Spanish)
www.domain.com/fr (French)
www.domain.com/de (German)
www.domain.com/it (Italian)
This structure ranks well on each of the regional Google sites and Google.com
If you were to register each domain you would also need to consider www.domain.es www.domain.mx www.domain.eq etc.
Just for the Spanish alone
It's also quite difficult to reserve a local domain, for example .es, .de or .fr if your host is not in those countries.
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Sorry forgot to add- however, you may want to remember that widgets in german is vidgets, so a different domain name spelling maybe relevant. We've just bought vidgets.com for one of our site translations and the Germans really appreciate it.
There's a silimar thread to your topic going on right now at [webmasterworld.com ]. I don't completely buy this heavily interlinking stuff. Particular if the content is unique, and translations, of course, are.