Links on a website can exist in one of two forms: internal or external. Internal links on a website are those which point to another page on that same domain whereas conversely external links on a website are those which point to another domain altogether.
It’s important to use both internal links as well as external links on your site with respect to search engine optimization, so let’s take a look at each.
Internal Links and External Links
Internal links are important for 3 major reasons. Firstly, internal links encourage your website’s visitors to spend more time on your site. That’s more content of yours which they are reading and perhaps will turn them into a regular reader of yours or encourage them to sign up for your RSS feed. This can also help in increasing your sign up rate for your mailing list if you have one. More time on your site also means more time which you can promote affiliate offers to them if your site is monetized (see how to monetize a website).
Secondly and in the same vein, internal links can lower your bounce rate significantly as again it encourages visitors to visit more than just the first page which they come to. Make sure that any pages which you link to within another page are relevant to that page in terms of content, of course.
Finally, internal links are important for spreading link juice organically on your own site whenever natural. Just like when linking to your site, you want to spread link juice, so if you have a page which carries a lot of link juice from external links from other sites, you can spread that more easily by linking to relevant pages from that page to help those other pages rank just by tapping your own link juice.
When you begin to develop a more authoritative site, your own link juice can help your new pages rank on their own very handily.
External links are somewhat important as well but in a different way than internal links. In this case you’re linking to someone else’s site from your site. You’ll generally do this when someone else has good content which is plain and simple worth linking to.
It’s important to do this from an SEO point of view every now and then, as well, because otherwise you look like a link juice hog who is stingy with their juice and unwilling to share which Google doesn’t like. You don’t have to go overboard as too many external links and you’re shooting holes in your link juice towing boat. You can also make effective use of the rel no follow tag so that you can manage your link juice while still creating external links to other sites.
For a complete explanation on when and how to use the rel no follow tag, click on the link in this sentence.