I have a site that has been active since 2001. I launched it and started doing what the other sites in the niche had been doing. That is, linking to each other via reciprocal links. Basically, in this niche, all the top sites have links to each other in a directory style (me) or on a links page. All of these links are very related to our content, as they are basically all competitors. Now, in the latest Google Pagerank update, my site that has been PR4 for 5 years or more is now a PR3. Interestingly, all the other sites that link with each other, their PR also went down, some from PR5 to PR3, some from PR3 to PR2 etc. I checked and basically ALL of the sites in this niche went down either 1 or 2 PR. The #1 site in the niche went from PR5 to PR3. No real change in rankings or traffic though. So, is it safe to assume that the heavy reciprocal link exchanging between all these sites is the culprit for lower PR? I wonder if I should delete my reciprocal link pages... or make them all nofollow? Use noindex in robots.txt??? How could I test this?
Not necessarily although too much will hurt you. Google is always trying to find ways to get better search results. They may have simply lowered how much they count a reciprocal link.
I think google just does that once in a while to ensure that the people who have optimized their site well stay at the top.
With reciprocal linking you as an SEO consultant have more control over the quality and quantity of the text links obtained. If you are starting with a low PR site finding quality reciprocal link partners is practically impossible.