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PageRank (PR) is a type of reputation capital, or authority given to webpages based on their popularity by other web pages "voting," or linking to them. A website has a maximum number of web page equivalents it can use to "vote." Each webpage in the site has an initial value of "1" giving the site a maximum value equal to the number of webpages it has. This PR is shaped by the linking topology employed within the website.
A common way for small websites to internally link pages is to have all web pages link to each other. This makes for easy navigation for the user. A website might have four pages
a menu on the left lists links to all four web pages and creates a structure where all pages link to each other. About 85% of all websites link in the fashion. This provides complete conservation of PageRank - no PageRank is lost. Since all pages are linked equally all pages have the same Pagerank - a PageRank of one page equivalent for each page.
All webpages link to the home page and the home page links back to all pages.
Some web sites have a hierarchy or "tree" of web pages. A common example would be for the sale of products. Each product category has a number of individual products under it that have two-way links between the individual product and the category page. The category pages have two way links with the home page.
This tree bleeds PR from the end pages (the individual products) and moves the PR to the category pages. As you would expect the category pages have a greater importance as each individual product votes on the category page. The home page does not get this full benefit and ends up with a PR that while much greater than the product pages, is significantly less than the category pages in terms of PR.
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