That part is true is the vast bulk of the people that built it. The public perception that the only sites that get in are owned by editors or their clients or friends is not true now and never was. I know a lot of the guys that built it, and as in any volunteer operation the bulk of the work is done by a tiny handful of people.
The crew that did most of the adds are obsessive compulsive to the max and have literally added in many cases hundreds of thousands of sites. I know them by name, I know their professions, and the hardcore site add guys arent SEOs, they're everything from teachers to medical professionals that literally donate countless hours categorizing, adding, arguing over the correct hierarchy, etc.
Those guys are no different than fanatic butterfly collectors, and they at least once took pride in the numbers... it was a competitive thing. The guys that built the directory did not do it on the sites of friends / clients / family. Those got added, but so did millions of sites that were added becuase they fit in a category.
Bear in mind that one of the things that glued those people together was the internal forum... a place for like-minded hobbyists to share. That function has largely been co-opted by the rise of social media, and if they dont have the compulsion to login to their forum it tends to decrease the likelihood of the time spent editing frankly just to impress each other.
The kind the public generally *thinks* edit there are there too, but are weeded out when caught. A large part of the issue there is that they cant handle a directory with 5-6 million sites with a mere handful of people... and because they're so often accused of self-interest they tend to suspiciously reject applications from damned near everyone for fear that they are one of *those*. That entrenched us-vs-them mentality guarantees it'll stay undermanned, so sadly, the reason many people think they are corrupt is because of their efforts to avoid people thinking they are corrupt. It's a catch-22.
The volunteer editor / free adds model should have been scrapped before 2005. That's roughly the time the directory hit 5 million sites. It's fluctuated between 5 - 6 million since then and linkrot caused by age almost exactly offsets adds being done, and some areas are largely dormant, dated, and untended due to lack of manpower and/or daunting amounts of spam submissions. It's just too large to do with the skeleton crew that does the real work, and since they're volunteers they cant be required to edit in a specific spot or a specific amount. The model just doesn't work.
The result of keeping the model long past its expiration date has been the degradation of the database as being a truly meaningful collection. IMO, that's another reason Google cut even the appearance of a tie. The value placed on a link there by SEs isnt entirely misplaced, but because of the issues going unaddressed... it will continue to decrease in import even as a reasonably good reason for an SE to think a site listed there has value.


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