Today it's common to have a single web site but multiple URLs which you want funnel visitors from. For example if you've purchased .Net and .Org variations of your domain name you want visitors to see your .Com web site, even if they type in the .Net URL.
You also might want to provide a short URL for advertising purposes. For example http://www.mydomain.com/specials/contests/spring-2011/ might have the details of a contest you are running. Having a shorter URL such as http://mydomain.com/contest/ makes it easier to work into promotional materials and for visitors to remember and enter.
The goal of redirecting traffic is to ensure visitors get where they should go, as quickly as possible, as reliably as possible, without confusing search engines.
In the above example you could just configure the domains to point to your web server and have all of them return the same content directly. As far as search engines are concerned this makes all three (.Net, .Org and .Com) copies of each other with no clear 'real' site. Per the contest example, the same would be the case if you were to copy the contest details from /specials/contests/spring-2011/ into a directory called /contest/ on your web server.
Copies of content are a problem because Google and other engines penalize sites which appear to have duplicated content. Here is why:
Search engines are in a battle with Content Farms which produce "popular content" and then distribute it across multiple sites in an effort to manipulate search engine results. The ultimate goal is to drive traffic to these sites which have no original content (and are thus easy to manufacture on a large scale, increasing traffic). Traffic means advertising dollars for these Content Farms.
Usually this content is of very little value to the visitor. Search engines don't like providing links of little value because it undermines their own value. Google very recently updated their anti-content farm logic. Expect more and more of this as time progresses and the Content Farms try to evade. Much like email spam filtering, this cat and mouse game is here to stay.
Redirecting your visitors using 301s avoids your site getting into the crossfire of this battle. 301s clearly tell search engines (and your visitors) that the content they're looking for is actually located somewhere else -- and where it is.
Given the above problems, 301 redirects are at the top of Google's recommendations for redirecting visitors. Furthermore 301s are the accepted industry best practice, and should be honored by all other search engines as well. They are also honored by browsers, web crawlers and other tools -- anything that supports HTTP 1.0 will support them. In the year 2011, that is everything, possibly including your refrigerator.
301s also have the added benefit of being extremely fast, cutting load time drastically. So they're not only easy to put in place on your server (one rule should do it!), but are the fastest and most compatible solution.
In the link to Google's recommendations they say that copies which don't appear to be malicious will be ignored. Usually this is the 'newer' domain or link. Here are problems with relying on this:
When a visitor or a search engine asks for a URL the server normally returns a 200 code, followed by the requested page.
The 301 code is the web server response for "Moved Permanently". It tells the requestor that the content they are looking for has moved, and provides the new URL instead of the content itself. The requestor will then try this new URL (the destination of the 301). For a web browser this is a quick and seamless sequence of events. It also is reflected in the browser's address bar, which will change to the destination URL.
In addition to copies there are other ways to shift visitors around but they all have drawbacks compared to 301s.
Are the above techniques inherently 'evil' and bad to use? Of course not. They have their places and uses. But bulk redirection of public traffic should not be one of them.
Curious to see how a URL is being handled currently? SeoConsultants.com has a great tool to let you see where a URL ultimately leads and how.
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Any problems and their solutions discussed here are designed to be examples and may not exactly match your situation.
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