Has Google Finally Learnt To Live With Web Directories?
As far as I remember Google took unprecedented action against web directories by penalizing them en mass on first October - 2007. It was at the height of Google’s war against paid links that passed ranking juice to other sites.
It is to be noted that human edited web directories existed even before Google came into being. In fact Yahoo started as a web directory. But the craze for directories begun with the introduction of Google’s search algoritym that is based on links and Page Rank. Once, Google became the most dominant search engine, all webmasters and SEOs wanted to get links for their sites which was now hard to come by. Actually, Google says that they want the web to run on links given to sites editorially. But the rat race for top placement gave birth to a market for buying and selling liks. Still there were short for links thus glorifying human edited web directories.
Many big companies and some inspired individuals started web directories to cash in on the situation. They promoted their directories heavily and soon gained high page rank. The Bluefind Directory, a start-up of John Scott, owner of V7N network is the clear example that gained Page Rank of 8 with PR5/6/7 internal pages shortly after it was launched. Some others followed and vigorously promoted their directories and gained both page rank and traffic in no time.
As much as they were promoted, most of those web directories were charging some FEES for inclusion or listing in those directories and webmasters were happily paying them. It is true that those directories didn’t only charge FEES for inclusion - they really did maintain their directories well and maintained high editorial standards and integrity. Most of those FEES went into developing and promoting the directories that benefited webmasters with traffic directly from directories. I too started one web directory called Best Internet Resource and managed it better than my wife and child. 
Then came a brigade of unethical webmasters who bought expired domains - installed the directory script ( the FREE version), loaded category dumps on the database and started to sell links on the basis of the home-page PR. It was too much for true directory owners and Google to swallow. Soon Google started to punish most web directories including the established ones who have became very popular and market leaders at that time. The punishment came in many forms - some were stripped of PR, some had reduced PR, some got reduced PR and -50 penalty, some were given -50 SERP penalty and also lost PR . The directories which fell amongst the last category also lost almost all their indexed pages and my directory unfortunately fell into this category. This continued for more than 2 years.
It is therefore ironic that, these days webmaster forums are flooded with directories on expired domains with same characteristics as earlier- but Google has returned back the SERPs of the penalized directories though PR penalty still continues. Hopefully, that too will go soon as most of them have gained some organic or natural backlinks over the years with age and promotion.
So, has Google worked on its algorithm that could differentiate between a well maintained and quality directory from a directory on expired domain. It seems just like that.
Well done Google - you rock. 