How does Google know if a link is a paid link or natural link?

Does google have someone sitting in a room figuring out which links are paid for and which arent? Does the text surrounding links throw up red flags? For example, if near a link it says "sponsored" or "paid"?

Answer

SEO Company, Qualified Impressions replies...

We're not sure. However, it is probably in your best interest to stay away from links that use "sponsored" or "paid" comments surrounding the link. Google is extremely smart and I bet they do throw up some red flags if your link has enough "factors" that point to it being paid for.  If the site is used for paid links, they may also have red flagged other links on the same website previous to you purchasing the link and that alone is enough for them to red flag your link and turn off the juice.

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