Can external links in a menu attract a penalty?

[SOS_Children]

We have some instances of external links (i.e. pointing to another domain) in site menus.

Although there are legitimate reasons (e.g. linking to a news archive kept on a separate domain) I understand this can be considered bad from a usability perspective.

This begs the question - is this bad for SEO? With the recent panda changes we've seen certain issues which were previously "only" about usability attract SEO penalties, but I can't find any references to this example.

Anyone have thoughts / experience?

[Jonathan1979]

Yes, this can cause a problem as the links will be classed as unnatural.  The best way to get round this is to make sure those links have the rel="nofollow" tag.

The penalty you should be worried about is Penguin, as this will hit pages with overoptimised anchor text links, and a menu link to an external site could generate hundreds, if not thousands of backlinks to another site, so the site you are linking to in that menu could have problems.

There are many instances being posted here of people being hit by penguin because they got featured sidebar links on other sites, resulting in 1000's of backlinks appearing in opensiteexplorer, all with the same optimized anchor text.  I liken the menu links to be similar in result.

But like I said, just ensure that the mass menu links to the other site are nofollowed and you should be ok.