I don't know how they can distinguish between a paid link and normal link..... there is no attribute that can tell Google - this is paid link and this is not. Typically when someone (or an SEO) starts buying links, they buy a lot of them. The pattern is unnatural and believe me Google can tell. Of course sometimes people slip under the radar but sooner or later they end up doing something else that helps Google sniff them out.there's no doubt what Google would like regarding linking. Why won't they say, after all, it is the basis of their business. Everybody is free to decide their own business.
Revenue generation hanger paid links violate Google's guidelines but ads don't
Check the replies Google's spam team head Matt Cutts says :- Paid link penalty
The video is new but whatever Mat told was the same thing I watched in other video. I guess I could not make my point clearer: It is not that Google hates webmasters selling links. You can sell links or banners or posts or the whole blog itself, there's nothing for Google to worry about. What makes Google worried is passing the pagerank juice. Why is Google worried for that? Because it affects their search result which in turn affects their business!
As a blogger if you allow a couple of dofollow links for guest authors, for sponsored posts, for review posts or for blogroll, they all pass pagerank juice. And they all do affect the search result. I agree, you can't involve in link buying and selling as it will create pattern and when the other party of transaction got penalized, you too are in trouble. This risk exists. Let's not forget that the risk is equally valid for all other dofollow links too!
SEO experts talks :-
Many wonder how Google knows that a particular links is paid link or not? Google at first kicks those dofollow links that are under 'Sponsored' or 'Advertisement' or 'Partner' headings or groups. For other links, Google will look in for pattern. So, whatever, Google is doing its business. And equally we are free to do our business. When you are getting benefits from me, naturally I'll try to enforce some rules on you so that you don't go against my interest. That is what Google doing with webmasters.
To summarize, as sponsored posts, guest posts, review posts are allowed to some extreme (Mat mentioned in another video that even excessive guest posts can harm your site) , I believe you can go for some monetization methods for your blog 'as long as it does not hamper your blog health and does not irritate or disturb your readers'. Doing anything excessively is harmful everywhere.