If you've studied Google's PageRank algorithm, you know that authority passed on to later pages is divided by the number of links on this page.
Interpreting this naively, it seems like a bad idea to ever link to another site. Shouldn't it mean that every link to an external site reduces the PageRank passed on to your own pages?
There is a lot more going on with Google than its PageRank algorithm. Here is what Matt Cutts had to say on the subject:
"I wouldn't recommend closing comments in an attempt to "hoard" your PageRank. In the same way that Google trusts sites less when they link to spammy sites or bad neighborhoods, parts of our system encourage links to good sites."
So linking to "good" sites helps your SEO and linking to "bad" sites hurts your SEO.
Let's talk about how to check your outbound links and aim for the right balance.
1. Crawl Your Site With Screaming Frog
Enter your homepage URL in the bar up top, next to the "Start" button, and press start.
Click the "External" tab and then sort by "Inlinks." Make sure "Inlinks" is sorted from largest to smallest.
2. Review Your Site-Wide Outlinks
If any of your outbound links are site-wide, sorting by "Inlinks" will cause these to float to the top of the list. The number of inlinks will be comparable to the number of pages on your site.
These are the links that appear in your site navigation, such as the header drop-downs, the sidebar, or the footer.
Compare the number of inlinks with the number of pages on your site. Is it a multiple? This typically means that the link appears in more than one place in the navigation.
A site-wide outbound link is not necessarily a bad thing, but these deserve extra attention. A site-wide link to your Twitter or Facebook page, for example, is practically universal these days. But a side-wide link to an unheard of site might put you at risk of a webspam penalty. Even if it doesn't, it's more likely to dilute PageRank than to help your SEO.
If you want to promote a lesser-known site, it's usually a better idea (for both of you) to include a few relevant contextual links in blog posts. "Blogrolls" and similar site-wide links have a chance of hurting both of you.
3. Review Your Remaining Outbound Links
Since you may have thousands of outbound links, reviewing each one individually is not always possible.
If this is the case, narrowing them down with some batch analysis in Ahrefs is recommended.
The reason for running a batch analysis is to identify which of your outbound links point to relatively obscure domains.
Make no mistake, I am not suggesting that you shouldn't link to obscure domains or that you should remove all links below a certain threshold. Instead, I'm suggesting that this is a good filter to narrow your search for low-quality outlinks.
Judging what makes a link "low-quality" is subjective, of course. Review these as you would citations in an academic paper. Are the sources trustworthy? Are they the original sources, if possible? Are they peer-reviewed if they are academic?
Replace any links that don't fit the bill.
Outbound link SEO is all about being a good web citizen and promoting the most trustworthy pages on the web by citing them as sources. Do you due diligence and you will perform well.