A web directory or link directory is a directory on the World Wide Web. It specializes in linking to other web sites and categorizing those links. Submission of websites to web directories is considered good practice as a common SEO (search engine optimization) technique to get vital back-links for the submitted website. One distinctive feature of 'directory submission' is that it can not be fully automated like search engine submissions, giving the directory more relevance.
A web directory is different to, but often incorporates a search engine, it does not just display lists of web pages based on keywords, instead it lists web sites by category and subcategory. Web directories often allow site owners to directly submit their site for inclusion, and have editors review submissions for fitness.
There are also a large number of niche directories, which focus on restricted regions, single languages, or specialist sectors. One type of niche directory with a large number of sites in existence, is the shopping directory for example. Shopping directories specialize in the listing of retail e-commerce sites.
Examples of well known, general, web directories are Yahoo! Directory and the Open Directory Project (ODP/DMOZ). ODP is significant due to its extensive categorization and large number of listings and its free availability for use by other directories and search engines.
A human-edited directory is created and maintained by editors who add links based on the policies particular to that directory.
Human-edited directories are often targeted by SEOs on the basis that links from reputable sources will improve rankings in the major search engines.
Many human-edited directories, including the Open Directory Project and the World Wide Web Virtual Library, are edited by volunteers, who are often experts in particular categories.
The paid for inclusion method enables the directory to offer timely inclusion for submissions and generally fewer listings. They often offer additional listing options to further enhance listings, including features listings and additional links to inner pages of the listed web site. These options typically have an additional fee associated, but offer significant help and visibility to sites and/or their inside pages.
Source » http://en.wikipedia.org/wiki/Web_directory » Under the GNU Free Documentation License

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