Lets say that all this happened to you... I would give you the same advice that we have give two new clients this past week that have come to us with this problem after the Penguin update. They had also used LinkVine and other article systems.
We also have two clients it has happened to - where the links were not through Blog / Splog networks but genuine natural links that happened due to a book launch. many of them were low quality and may ahve looked spammy - but we know for certain she never did anything BH or even GH.
Anyway, our advice would be to attack from both sides.
I would say not to continue your link building though - at least not in the way you were doing it before.
If you are going to do ANY link building it needs to be done with a new perspective. They need to be real links that you acquire through means of networking or blogging or writing your own articles.
Yup - a lot of work... but it will pay off.
If you are going to any paid link building (which I wouldnt advise) I would ask for nofollows on them.
Even though some high trafficked websites in the SEO community still SELL links (such as SER) - it is not enough to rely on webmasters to tell you you have to have a nofollow on the paid links. You should ask for them.
If you were to engage in paid link building without nofollows you need to change your entire strayegy and make sure they have a diverse range of anchor texts. Put your URL in some, put your company name in some. DO NOT just go after a money keyword. I want to be clear though - I am in no way advising this.
My advice though would be to not do paid link building unless doing nofollows.
Certainly stay away from those Blog networks such as those you mentioned.
Some on other forums are also advising clients that it is a waste of time trying to attack the bad links.
I disagree - and although it may take a lot of time and resources.... you have to ask yourself what your domain is worth to you. If you have spent a lot of time on the website and had it for some years - but just made some mistakes in your eagerness to get ahead... then hold your hands up (which it sounds like you are doing), turn a corner and attack vigorously to try to get it all corrected.
Get a list of all the domains linking to you, and all their pages for each individual domain.
Input the domain list into some software (PM ME) that will quickly get you as many of the contact details (from whois records). Within a few minutes you could have a database of emails for a 1000 domains that you will need to contact. Come up with a standard email format.... or with a little programming you could make your own script to do all this. That is what we have done for the clients above. We got through this task for hundreds of domains within a few days.
Now, I must admit - even though our email is nicely worded and effective (as it reads) - I would say, just based on the following two points - the success rate of this will be very low...
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The webmasters of these offending websites that have links to you have NOTHING to gain by spending time to delink you...
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The WHOIS information isnt always the best contact information
BUT - at least you are doing something.
Your success rate may be 2-5% with this - but even if you manage to get 20 or 30 of these sites to delink your website...it is still something you can document and send to Google as aproactive steps you have taken to rectify the situation.
Depending on the amount of links to your website - it may only change the percentage of good links to bad links slightly.... That's why you need to do what you can on acquiring natural links.
It might not be a quick process. It will $%##$ you off doing it. There is no guarantee they will lift a penalty - EVER - but one thing is for sure - if you dont do anything and show some proactive action to remedy the problems - they are 100% sure to never lift it.
I know one website that had a penalty 18 months ago... the owner did not want to do any reconsideration request - since they thought it would result in a manual review.
The only thing his actions (or lack of ) did was ensure his website never allowed back into the index. A 10,000 page website that was top in their industry. He did stuff wrong - but didn't want to admit it. Doing a SITE:domain.com search to this day (18 months on) doesn't find any of his pages.
So, it all depends on what the domain means to you and if you are prepared to do SOME action on the bad stuff - because you will have to in my opinion.
Hope this helps - and if you need the name of that software that I recommend for the WHOIS records - just PM me. I don't like putting links in posts since it looks like advertising / promoting. It isn't our software but one we use.
Any other questions - just let us know.
Carlos