What if you are a webmaster on a shared hosting service. Would your website be penalized if another domain spams from that same IP address?
According to Matt Cutts from Google, the answer is no.
"On the list of things I worry about, that would not be on the top. Google understands that shared web hosting happens. You cannot really control who else is on that address or Class C subnet".
So there you go. Don't worry about it if you are on a shared hosting server.
Matt does brings up the case of a web server Google found that had thousands of spammy websites with one website that isn't spammy. Now some may read into this to be a contradiction. But what we don't know is if this server was on a shared hosting service or a dedicated server. Obviously if it is coming from one IP address, the entire suite of domains are going to get SEO banned.
But if it is on a shared IP/hosting server, the issue is a little more delicate. The reason I say this is that it could just very well be that there is an innocent victim here - the lone site owner surrounded by a spammer. To resolve the issue, Google will likely have to perform a manual review and do a reverse IP lookup on every site on that IP address (a lot of work). Then, domain name ownership records will be compared.
This is why I prefer to show my domain name registration records publicly to avoid the scrutiny.
When I first began building websites and placing them on shared hosting services, I sometimes found that I was sitting on a server with lots of spammy websites. The only course I had, was to move my site to another hosting service. This was the case on shared hosting services that had unlimited domains - which is common these days.
Over the years, there has been much talk about putting your website on shared hosting servers. Some myth, some fact:
Buy a dedicated IP address, even if you are on a shared host
Being on an IP with spammy websites could result in manual review and affect your ranking
Class C issues are not a factor in SEO as it is difficult to assess the entire subnet and make an outright determination
No evidence that dedicated IP sites have advantage over shared IP sites
Best not to link your websites on the same class C subnet as it may be flagged as spammy
After reviewing all of this, I came to the conclusion that if you truly want to not worry about all these issues, then just get a dedicated server with dedicated IP address. If you host multiple websites, get dedicated IP addresses for those websites. If they are in the same class C subnet, don't worry about it. That's the safest and most obvious approach for the truly paranoid.
For some of us, we don't have those kind of financial resources to throw around. Dedicated servers can be expensive to run and you do have to manage it all by yourself. Shared hosting is affordable and cheap but not without its disadvantages.
What you should be aware of is if you decide to link one website you own to another you own. In that case, use nofollow. That at least will show Google that you have put your best foot forward and are consciously aware of what you are doing. That you don't intend to pass link juice or are building a global wheel linking empire deliberately with SEO in mind.
It is of my opinion that is ok to interlink websites as long as you follow the nofollow rule. It is your business, after all.
For example, if you run a web consulting business you want to promote the websites you have worked on. It is a common sense business practice to market your own work. Why would you not want to do that?
And if you had a website about iPads and a news website, there is nothing wrong in linking the two. Users of the news website may want to read about iPad news, products and services. You may be selling iPads covers, why would you not want to promote this on your news site?
It is your business, your hard earned traffic. It is not an SEO concern nor should you be penalized by it. Contrary to belief, the beauty of the Internet is in its discovery. The center of the Internet is not one website search engine dispersing users. Realize that Google cross promotes their products and services from google.com too. So why shouldn't you? Youtube. DoubleClick. AdMob. Invite Media. Do they ring a bell? They all are Google owned websites promoted from within Google pages.
Do what is natural and what makes sense. And if you are creating spammy websites, no matter where you create them, you are likely going to get caught.