Linking your domains when they are related in some way is perfectly fine according to Google as long as this isn’t being done solely to artificially increase PageRank.
This makes sense when:
- Your business has different websites for different countries (example this country selector page: http://www.jobmanji.co.uk/select-country)
- Your business is part of a group (Amazon’s footer links to all their properties: http://www.amazon.com/)
If you are building thousands of domains and linking them together with the sole purpose of improving keyword rankings then this classifies as spam. In Matt Cutt’s video it would seem as though Google have an algorithmic way of identifying this but as of 28th March 2014 there are sites that perform well in the UK insurance sector that have backlink profiles made up entirely of interconnected domains which are hosted at the same IP and have the same registration information which shows that Google is actually not sophisticated enough to detect this automatically.
Here is an example from an insurance company which is currently ranking well in Google. I have blurred out part of the domain because I don’t believe in outing them publicly. The registration of the domains is the same as their main website as well.