How Google Defines a Paid Link
Google has gone so far as to suggest that any and all links within a sponsored post should be treated as sponsored links, even if you are linking to a friend or other reference source not financially connected to the blog post. If you are particularly concerned about it, it’s better to be safe than sorry.
Google’s criteria for defining a paid link are different from those that the FTC uses. A paid link, in the eyes of Google, is
A text link placed on a blog sidebar, header, or footer that is paid for by an advertiser.
A text link within a post that was paid by an advertiser to be placed on your website.
A text link within a post in which the content was written at the request of an advertiser or sponsor, and was compensated with money and/or goods and services.
Unfortunately, due to the nature of Google’s business, the company is notoriously secretive about any situations that fall into a gray area not mentioned in the preceding list. This is because the Google folks need to keep their full ranking methodology secret so as to keep real spammers from exploiting the system.
In the following situations, it may or may not be okay to use regular links without the NoFollow tag. Again, if you are concerned, it’s better to be safe than sorry (which means: Use the tag):
A blogger gets a free product to give away in a contest and receives no other compensation for mentioning the product.
A blogger uses an affiliate link that goes directly to the merchant’s site (such as Amazon.com).
Most affiliate links go through a redirected intermediary domain, making the use of a NoFollow tag unnecessary.
A blogger links to a former sponsor just because he or she likes the sponsor’s products.