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Say I have a site 123example.com, with roughly 100 backlinks, which has increased from a google page 27 to page 12 for my keywords over the last month and continues toward the top 10... I have another domain 123.com, which has roughly 30 backlinks, that just points to the 1st domain. I would like to use 123.com as the primary domain and use a 301 redirect on 123example.com.

Would I have to start my link building back over again for 123.com or will the backlinks and PR with the 301 redirect of 123example.com transfer over to the new domain?

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The 301 redirect will tell the search engines that the pages have moved and to associate the old URLs with the new URLs (remember, search engines index and rank pages, not website). This includes any incoming links to those pages, including your home page. Just keep in mind that there is a dampening factor so you do lose a little bit of "link juice" but it's better then losing everything. Another benefit is when users go to the old URLs they will also be taken to the new URLs so anyone finding the old links or have an old bookmark will still find your new pages.

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Using the 301 redirect should allow the PR and backlinks to transfer to new domain.

Although one thing to keep in mind is that Google will look at the content of the new site to determine backlink relevancy, which does have a slight effect on the overall link juice coming from a particular backlink.

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